Correlation Between Balchem and Codexis

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

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

Diversification Opportunities for Balchem and Codexis

-0.09

Correlation Coefficient

Balchem  Codexis

Good diversification

The 3 months correlation between Balchem and Codexis is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Balchem and Codexis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Codexis 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 Codexis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Codexis has no effect on the direction of Balchem i.e., Balchem and Codexis go up and down completely randomly.

Pair Corralation between Balchem and Codexis

Given the investment horizon of 90 days Balchem is expected to generate 2.02 times less return on investment than Codexis. But when comparing it to its historical volatility, Balchem is 3.72 times less risky than Codexis. It trades about 0.03 of its potential returns per unit of risk. Codexis is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  670.00  in Codexis on October 24, 2024 and sell it today you would lose (171.00) from holding Codexis or give up 25.52% of portfolio value over 90 days.

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

Balchem  vs.  Codexis

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.

Codexis

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Codexis are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Codexis unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Balchem and Codexis

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

The idea behind Balchem and Codexis 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.