Correlation Between Booz Allen and Equifax

Can any of the company-specific risk be diversified away by investing in both Booz Allen and Equifax 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 Equifax 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 Equifax, you can compare the effects of market volatilities on Booz Allen and Equifax 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 Equifax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Booz Allen and Equifax.

Diversification Opportunities for Booz Allen and Equifax

-0.1

Correlation Coefficient

Booz Allen  Equifax

Good diversification

The 3 months correlation between Booz and Equifax is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Booz Allen Hamilton and Equifax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equifax 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 Equifax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equifax has no effect on the direction of Booz Allen i.e., Booz Allen and Equifax go up and down completely randomly.

Pair Corralation between Booz Allen and Equifax

Considering the 90-day investment horizon Booz Allen Hamilton is expected to generate 0.94 times more return on investment than Equifax. However, Booz Allen Hamilton is 1.06 times less risky than Equifax. It trades about 0.05 of its potential returns per unit of risk. Equifax is currently generating about 0.04 per unit of risk. If you would invest  10,126  in Booz Allen Hamilton on September 3, 2024 and sell it today you would earn a total of  4,692  from holding Booz Allen Hamilton or generate 46.34% return on investment over 90 days.

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

Booz Allen Hamilton  vs.  Equifax

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 fairly strong basic indicators, Booz Allen is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Equifax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equifax has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Booz Allen and Equifax

The main advantage of trading using opposite Booz Allen and Equifax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Booz Allen position performs unexpectedly, Equifax 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 Equifax will offset losses from the drop in Equifax's long position.

The idea behind Booz Allen Hamilton and Equifax 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.