Correlation Between Booz Allen and Huron Consulting

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

Diversification Opportunities for Booz Allen and Huron Consulting

0.11

Correlation Coefficient

Booz Allen  Huron Consulting

Average diversification

The 3 months correlation between Booz and Huron is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Booz Allen Hamilton and Huron Consulting Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huron Consulting 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 Huron Consulting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huron Consulting has no effect on the direction of Booz Allen i.e., Booz Allen and Huron Consulting go up and down completely randomly.

Pair Corralation between Booz Allen and Huron Consulting

Considering the 90-day investment horizon Booz Allen Hamilton is expected to under-perform the Huron Consulting. In addition to that, Booz Allen is 1.26 times more volatile than Huron Consulting Group. It trades about -0.02 of its total potential returns per unit of risk. Huron Consulting Group is currently generating about 0.11 per unit of volatility. If you would invest  10,886  in Huron Consulting Group on September 3, 2024 and sell it today you would earn a total of  1,395  from holding Huron Consulting Group or generate 12.81% 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.  Huron Consulting Group

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.

Huron Consulting

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Huron Consulting Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Huron Consulting displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Booz Allen and Huron Consulting

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

The idea behind Booz Allen Hamilton and Huron Consulting Group 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.