Correlation Between Balchem and GABY

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

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

Diversification Opportunities for Balchem and GABY

0.0

Correlation Coefficient

Balchem  GABY

Pay attention - limited upside

The 3 months correlation between Balchem and GABY is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Balchem and GABY Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GABY Inc 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 GABY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GABY Inc has no effect on the direction of Balchem i.e., Balchem and GABY go up and down completely randomly.

Pair Corralation between Balchem and GABY

Given the investment horizon of 90 days Balchem is expected to generate 45.32 times less return on investment than GABY. But when comparing it to its historical volatility, Balchem is 18.26 times less risky than GABY. It trades about 0.03 of its potential returns per unit of risk. GABY Inc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.80  in GABY Inc on October 5, 2024 and sell it today you would lose (0.66) from holding GABY Inc or give up 82.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	80.25%
Values	Daily Returns

Balchem  vs.  GABY Inc

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.

GABY Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GABY Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, GABY 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 GABY

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

The idea behind Balchem and GABY Inc 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.