Correlation Between Balchem and Aterian

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Can any of the company-specific risk be diversified away by investing in both Balchem and Aterian 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 Aterian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Balchem and Aterian, you can compare the effects of market volatilities on Balchem and Aterian 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 Aterian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balchem and Aterian.

Diversification Opportunities for Balchem and Aterian

BalchemAterianDiversified AwayBalchemAterianDiversified Away100%
0.28
  Correlation Coefficient

Modest diversification

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

Pair Corralation between Balchem and Aterian

Given the investment horizon of 90 days Balchem is expected to generate 0.45 times more return on investment than Aterian. However, Balchem is 2.23 times less risky than Aterian. It trades about -0.09 of its potential returns per unit of risk. Aterian is currently generating about -0.12 per unit of risk. If you would invest  17,288  in Balchem on October 16, 2024 and sell it today you would lose (1,426) from holding Balchem or give up 8.25% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Balchem  vs.  Aterian

 Performance 
JavaScript chart by amCharts 3.21.15NovDec -20-15-10-505
JavaScript chart by amCharts 3.21.15BCPC ATER
       Timeline  
Balchem 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan155160165170175180185
Aterian 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Aterian has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan2.22.42.62.83

Balchem and Aterian Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.34-1.78-1.22-0.66-0.09710.430.991.552.112.67 0.050.100.150.20
JavaScript chart by amCharts 3.21.15BCPC ATER
       Returns  

Pair Trading with Balchem and Aterian

The main advantage of trading using opposite Balchem and Aterian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balchem position performs unexpectedly, Aterian 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 Aterian will offset losses from the drop in Aterian's long position.
The idea behind Balchem and Aterian 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.

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