Correlation Between ICF International and Booz Allen

Can any of the company-specific risk be diversified away by investing in both ICF International and Booz Allen 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 ICF International and Booz Allen into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ICF International and Booz Allen Hamilton, you can compare the effects of market volatilities on ICF International and Booz Allen 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 ICF International with a short position of Booz Allen. Check out your portfolio center. Please also check ongoing floating volatility patterns of ICF International and Booz Allen.

Diversification Opportunities for ICF International and Booz Allen

0.67

Correlation Coefficient

ICF International  Booz Allen

Poor diversification

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

Pair Corralation between ICF International and Booz Allen

Given the investment horizon of 90 days ICF International is expected to under-perform the Booz Allen. But the stock apears to be less risky and, when comparing its historical volatility, ICF International is 1.13 times less risky than Booz Allen. The stock trades about -0.11 of its potential returns per unit of risk. The Booz Allen Hamilton is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  15,594  in Booz Allen Hamilton on September 3, 2024 and sell it today you would lose (776.00) from holding Booz Allen Hamilton or give up 4.98% of portfolio value over 90 days.

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

ICF International  vs.  Booz Allen Hamilton

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.

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.

Pair Trading with ICF International and Booz Allen

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

The idea behind ICF International and Booz Allen Hamilton 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.