Correlation Between Balchem and AKITA Drilling

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

By analyzing existing cross correlation between Balchem and AKITA Drilling, you can compare the effects of market volatilities on Balchem and AKITA Drilling 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 AKITA Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balchem and AKITA Drilling.

Diversification Opportunities for Balchem and AKITA Drilling

0.37

Correlation Coefficient

Balchem  AKITA Drilling

Weak diversification

The 3 months correlation between Balchem and AKITA is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Balchem and AKITA Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AKITA Drilling 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 AKITA Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AKITA Drilling has no effect on the direction of Balchem i.e., Balchem and AKITA Drilling go up and down completely randomly.

Pair Corralation between Balchem and AKITA Drilling

Given the investment horizon of 90 days Balchem is expected to generate 1.42 times less return on investment than AKITA Drilling. But when comparing it to its historical volatility, Balchem is 1.62 times less risky than AKITA Drilling. It trades about 0.03 of its potential returns per unit of risk. AKITA Drilling is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  114.00  in AKITA Drilling on October 9, 2024 and sell it today you would earn a total of  6.00  from holding AKITA Drilling or generate 5.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.47%
Values	Daily Returns

Balchem  vs.  AKITA Drilling

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.

AKITA Drilling

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AKITA Drilling are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, AKITA Drilling is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Balchem and AKITA Drilling

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

The idea behind Balchem and AKITA Drilling 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.