Correlation Between Booz Allen and CRA International

Can any of the company-specific risk be diversified away by investing in both Booz Allen and CRA International at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Booz Allen and CRA International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Booz Allen Hamilton and CRA International, you can compare the effects of market volatilities on Booz Allen and CRA International and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Booz Allen with a short position of CRA International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Booz Allen and CRA International.

Diversification Opportunities for Booz Allen and CRA International

0.05

Correlation Coefficient

Booz Allen  CRA International

Significant diversification

The 3 months correlation between Booz and CRA is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Booz Allen Hamilton and CRA International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CRA International and Booz Allen is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Booz Allen Hamilton are associated (or correlated) with CRA International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CRA International has no effect on the direction of Booz Allen i.e., Booz Allen and CRA International go up and down completely randomly.

Pair Corralation between Booz Allen and CRA International

Considering the 90-day investment horizon Booz Allen is expected to generate 6.51 times less return on investment than CRA International. But when comparing it to its historical volatility, Booz Allen Hamilton is 1.11 times less risky than CRA International. It trades about 0.02 of its potential returns per unit of risk. CRA International is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  10,006  in CRA International on September 20, 2024 and sell it today you would earn a total of  8,851  from holding CRA International or generate 88.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Booz Allen Hamilton  vs.  CRA International

Booz Allen Hamilton

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Booz Allen Hamilton has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

CRA International

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CRA International are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, CRA International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Booz Allen and CRA International

The main advantage of trading using opposite Booz Allen and CRA International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Booz Allen position performs unexpectedly, CRA International can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in CRA International will offset losses from the drop in CRA International's long position.

The idea behind Booz Allen Hamilton and CRA International pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.