Correlation Between Booz Allen and NextTrip

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

Diversification Opportunities for Booz Allen and NextTrip

0.75

Correlation Coefficient

Booz Allen  NextTrip

Poor diversification

The 3 months correlation between Booz and NextTrip is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Booz Allen Hamilton and NextTrip in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextTrip 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 NextTrip. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NextTrip has no effect on the direction of Booz Allen i.e., Booz Allen and NextTrip go up and down completely randomly.

Pair Corralation between Booz Allen and NextTrip

Considering the 90-day investment horizon Booz Allen Hamilton is expected to under-perform the NextTrip. But the stock apears to be less risky and, when comparing its historical volatility, Booz Allen Hamilton is 3.13 times less risky than NextTrip. The stock trades about -0.11 of its potential returns per unit of risk. The NextTrip is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  632.00  in NextTrip on December 28, 2024 and sell it today you would lose (48.00) from holding NextTrip or give up 7.59% 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.  NextTrip

Booz Allen Hamilton

Risk-Adjusted Performance

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 April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

NextTrip

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NextTrip are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, NextTrip may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Booz Allen and NextTrip

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

The idea behind Booz Allen Hamilton and NextTrip 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.