Correlation Between Balchem and Kingboard Chemical

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

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

Diversification Opportunities for Balchem and Kingboard Chemical

-0.8

Correlation Coefficient

Balchem  Kingboard Chemical

Pay attention - limited upside

The 3 months correlation between Balchem and Kingboard is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Balchem and Kingboard Chemical Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingboard Chemical 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 Kingboard Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingboard Chemical has no effect on the direction of Balchem i.e., Balchem and Kingboard Chemical go up and down completely randomly.

Pair Corralation between Balchem and Kingboard Chemical

Given the investment horizon of 90 days Balchem is expected to generate 1.07 times more return on investment than Kingboard Chemical. However, Balchem is 1.07 times more volatile than Kingboard Chemical Holdings. It trades about 0.03 of its potential returns per unit of risk. Kingboard Chemical Holdings is currently generating about -0.02 per unit of risk. If you would invest  13,787  in Balchem on October 24, 2024 and sell it today you would earn a total of  2,375  from holding Balchem or generate 17.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Balchem  vs.  Kingboard Chemical Holdings

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.

Kingboard Chemical

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kingboard Chemical Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Kingboard Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Balchem and Kingboard Chemical

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

The idea behind Balchem and Kingboard Chemical Holdings 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .