Correlation Between Booz Allen and American Diversified
Can any of the company-specific risk be diversified away by investing in both Booz Allen and American Diversified 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 American Diversified 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 American Diversified Holdings, you can compare the effects of market volatilities on Booz Allen and American Diversified 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 American Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of Booz Allen and American Diversified.
Diversification Opportunities for Booz Allen and American Diversified
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Booz and American is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Booz Allen Hamilton and American Diversified Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Diversified 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 American Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Diversified has no effect on the direction of Booz Allen i.e., Booz Allen and American Diversified go up and down completely randomly.
Pair Corralation between Booz Allen and American Diversified
Considering the 90-day investment horizon Booz Allen is expected to generate 3.61 times less return on investment than American Diversified. But when comparing it to its historical volatility, Booz Allen Hamilton is 6.75 times less risky than American Diversified. It trades about 0.3 of its potential returns per unit of risk. American Diversified Holdings is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 0.13 in American Diversified Holdings on October 23, 2024 and sell it today you would earn a total of 0.03 from holding American Diversified Holdings or generate 23.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 94.74% |
| Values | Daily Returns |
Booz Allen Hamilton vs. American Diversified Holdings
Performance |
| Timeline |
| Booz Allen Hamilton |
| American Diversified |
Booz Allen and American Diversified Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Booz Allen and American Diversified
The main advantage of trading using opposite Booz Allen and American Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Booz Allen position performs unexpectedly, American Diversified 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 American Diversified will offset losses from the drop in American Diversified's long position.| Booz Allen vs. Huron Consulting Group | Booz Allen vs. CRA International | Booz Allen vs. Forrester Research | Booz Allen vs. Exponent |
| American Diversified vs. AimRite Holdings Corp | American Diversified vs. Sack Lunch Productions | American Diversified vs. American Cannabis | American Diversified vs. Booz Allen Hamilton |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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