Correlation Between Balchem and Atlas Air

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

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

Diversification Opportunities for Balchem and Atlas Air

0.22

Correlation Coefficient

Balchem  Atlas Air

Modest diversification

The 3 months correlation between Balchem and Atlas is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Balchem and Atlas Air Worldwide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlas Air Worldwide and Balchem 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 Balchem are associated (or correlated) with Atlas Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlas Air Worldwide has no effect on the direction of Balchem i.e., Balchem and Atlas Air go up and down completely randomly.

Pair Corralation between Balchem and Atlas Air

Given the investment horizon of 90 days Balchem is expected to generate 2.74 times more return on investment than Atlas Air. However, Balchem is 2.74 times more volatile than Atlas Air Worldwide. It trades about 0.04 of its potential returns per unit of risk. Atlas Air Worldwide is currently generating about 0.03 per unit of risk. If you would invest  12,478  in Balchem on October 9, 2024 and sell it today you would earn a total of  3,238  from holding Balchem or generate 25.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	9.09%
Values	Daily Returns

Balchem  vs.  Atlas Air Worldwide

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 uncertain 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.

Atlas Air Worldwide

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Atlas Air Worldwide has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Atlas Air is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Balchem and Atlas Air

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

The idea behind Balchem and Atlas Air Worldwide 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.