Correlation Between Booz Allen and Sack Lunch

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

Diversification Opportunities for Booz Allen and Sack Lunch

-0.12

Correlation Coefficient

Booz Allen  Sack Lunch

Good diversification

The 3 months correlation between Booz and Sack is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Booz Allen Hamilton and Sack Lunch Productions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sack Lunch Productions 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 Sack Lunch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sack Lunch Productions has no effect on the direction of Booz Allen i.e., Booz Allen and Sack Lunch go up and down completely randomly.

Pair Corralation between Booz Allen and Sack Lunch

Considering the 90-day investment horizon Booz Allen Hamilton is expected to generate 0.25 times more return on investment than Sack Lunch. However, Booz Allen Hamilton is 3.95 times less risky than Sack Lunch. It trades about -0.02 of its potential returns per unit of risk. Sack Lunch Productions is currently generating about -0.05 per unit of risk. If you would invest  15,628  in Booz Allen Hamilton on September 4, 2024 and sell it today you would lose (756.00) from holding Booz Allen Hamilton or give up 4.84% of portfolio value over 90 days.

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

Booz Allen Hamilton  vs.  Sack Lunch Productions

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.

Sack Lunch Productions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sack Lunch Productions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Booz Allen and Sack Lunch

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

The idea behind Booz Allen Hamilton and Sack Lunch Productions 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.