Correlation Between Balchem and Aeon

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

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

Diversification Opportunities for Balchem and Aeon

-0.28

Correlation Coefficient

Balchem  Aeon

Very good diversification

The 3 months correlation between Balchem and Aeon is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Balchem and Aeon Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeon 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 Aeon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeon has no effect on the direction of Balchem i.e., Balchem and Aeon go up and down completely randomly.

Pair Corralation between Balchem and Aeon

Given the investment horizon of 90 days Balchem is expected to generate 0.39 times more return on investment than Aeon. However, Balchem is 2.58 times less risky than Aeon. It trades about 0.03 of its potential returns per unit of risk. Aeon Co is currently generating about -0.38 per unit of risk. If you would invest  14,852  in Balchem on October 8, 2024 and sell it today you would earn a total of  864.00  from holding Balchem or generate 5.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	2.69%
Values	Daily Returns

Balchem  vs.  Aeon Co

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 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.

Aeon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aeon Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Aeon is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Balchem and Aeon

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

The idea behind Balchem and Aeon Co 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..