Correlation Between Balchem and International Flavors

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

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

Diversification Opportunities for Balchem and International Flavors

-0.32

Correlation Coefficient

Balchem  International Flavors

Very good diversification

The 3 months correlation between Balchem and International is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Balchem and International Flavors Fragranc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Flavors 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 International Flavors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Flavors has no effect on the direction of Balchem i.e., Balchem and International Flavors go up and down completely randomly.

Pair Corralation between Balchem and International Flavors

Given the investment horizon of 90 days Balchem is expected to generate 1.01 times more return on investment than International Flavors. However, Balchem is 1.01 times more volatile than International Flavors Fragrances. It trades about 0.05 of its potential returns per unit of risk. International Flavors Fragrances is currently generating about -0.04 per unit of risk. If you would invest  15,330  in Balchem on September 29, 2024 and sell it today you would earn a total of  1,186  from holding Balchem or generate 7.74% return on investment over 90 days.

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

Balchem  vs.  International Flavors Fragranc

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.

International Flavors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Flavors Fragrances has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Balchem and International Flavors

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

The idea behind Balchem and International Flavors Fragrances 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.