Correlation Between Booz Allen and SGS SA

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

Diversification Opportunities for Booz Allen and SGS SA

0.34

Correlation Coefficient

Booz Allen  SGS SA

Weak diversification

The 3 months correlation between Booz and SGS is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Booz Allen Hamilton and SGS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGS SA 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 SGS SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGS SA has no effect on the direction of Booz Allen i.e., Booz Allen and SGS SA go up and down completely randomly.

Pair Corralation between Booz Allen and SGS SA

Considering the 90-day investment horizon Booz Allen is expected to generate 241.19 times less return on investment than SGS SA. But when comparing it to its historical volatility, Booz Allen Hamilton is 80.63 times less risky than SGS SA. It trades about 0.04 of its potential returns per unit of risk. SGS SA is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  229,975  in SGS SA on September 14, 2024 and sell it today you would lose (220,235) from holding SGS SA or give up 95.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	73.33%
Values	Daily Returns

Booz Allen Hamilton  vs.  SGS SA

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 unfluctuating performance in the last few months, the Stock's basic 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.

SGS SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SGS SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Booz Allen and SGS SA

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

The idea behind Booz Allen Hamilton and SGS SA 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.