Correlation Between Booz Allen and ICF International

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

Diversification Opportunities for Booz Allen and ICF International

0.67

Correlation Coefficient

Booz Allen  ICF International

Poor diversification

The 3 months correlation between Booz and ICF is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Booz Allen Hamilton and ICF International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICF 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 ICF International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICF International has no effect on the direction of Booz Allen i.e., Booz Allen and ICF International go up and down completely randomly.

Pair Corralation between Booz Allen and ICF International

Considering the 90-day investment horizon Booz Allen Hamilton is expected to under-perform the ICF International. In addition to that, Booz Allen is 1.09 times more volatile than ICF International. It trades about -0.27 of its total potential returns per unit of risk. ICF International is currently generating about -0.29 per unit of volatility. If you would invest  16,951  in ICF International on September 3, 2024 and sell it today you would lose (3,094) from holding ICF International or give up 18.25% of portfolio value over 90 days.

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

Booz Allen Hamilton  vs.  ICF 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 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.

ICF International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ICF International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak 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 recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Booz Allen and ICF International

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

The idea behind Booz Allen Hamilton and ICF 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.