Correlation Between Arq and Balchem

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

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

Diversification Opportunities for Arq and Balchem

0.3

Correlation Coefficient

Arq  Balchem

Weak diversification

The 3 months correlation between Arq and Balchem is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Arq Inc and Balchem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balchem and Arq 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 Arq Inc are associated (or correlated) with Balchem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balchem has no effect on the direction of Arq i.e., Arq and Balchem go up and down completely randomly.

Pair Corralation between Arq and Balchem

Considering the 90-day investment horizon Arq Inc is expected to generate 3.61 times more return on investment than Balchem. However, Arq is 3.61 times more volatile than Balchem. It trades about 0.07 of its potential returns per unit of risk. Balchem is currently generating about 0.04 per unit of risk. If you would invest  264.00  in Arq Inc on October 9, 2024 and sell it today you would earn a total of  492.00  from holding Arq Inc or generate 186.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Arq Inc  vs.  Balchem

Arq Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arq Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Arq reported solid returns over the last few months and may actually be approaching a breakup point.

Balchem

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Balchem has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Arq and Balchem

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

The idea behind Arq Inc and Balchem 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.