Correlation Between Avient Corp and Balchem

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

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

Diversification Opportunities for Avient Corp and Balchem

0.76

Correlation Coefficient

Avient Corp  Balchem

Poor diversification

The 3 months correlation between Avient and Balchem is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Avient Corp and Balchem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balchem and Avient Corp 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 Avient Corp 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 Avient Corp i.e., Avient Corp and Balchem go up and down completely randomly.

Pair Corralation between Avient Corp and Balchem

Given the investment horizon of 90 days Avient Corp is expected to generate 1.18 times more return on investment than Balchem. However, Avient Corp is 1.18 times more volatile than Balchem. It trades about 0.24 of its potential returns per unit of risk. Balchem is currently generating about 0.23 per unit of risk. If you would invest  4,661  in Avient Corp on September 1, 2024 and sell it today you would earn a total of  464.00  from holding Avient Corp or generate 9.95% return on investment over 90 days.

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

Avient Corp  vs.  Balchem

Avient Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Avient Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Avient Corp may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Balchem

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Balchem are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Balchem is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Avient Corp and Balchem

The main advantage of trading using opposite Avient Corp and Balchem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avient Corp 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 Avient Corp 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.