Okay, this story is getting ridiculous. It went from a cute anecdote to people calling "Paul" psychic to actual analysis of it. That is ridiculous. Okay, octopi are living beings, but no one and nothing is psychic. Maybe he has a penchant for certain colours depending on how hungry he is. Maybe he picks flags based on which way he feels like floating that day.
I focused on statistics for my mathematics degree, so I love numbers. However, any one with a basic knowledge of flipping a coin would know that "Paul" has a 50% chance of getting the correct answer. It is called luck.