Correlation Between Balchem and Mosaic

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

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

Diversification Opportunities for Balchem and Mosaic

-0.17

Correlation Coefficient

Balchem  Mosaic

Good diversification

The 3 months correlation between Balchem and Mosaic is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Balchem and The Mosaic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mosaic 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 Mosaic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mosaic has no effect on the direction of Balchem i.e., Balchem and Mosaic go up and down completely randomly.

Pair Corralation between Balchem and Mosaic

Given the investment horizon of 90 days Balchem is expected to under-perform the Mosaic. But the stock apears to be less risky and, when comparing its historical volatility, Balchem is 1.7 times less risky than Mosaic. The stock trades about -0.05 of its potential returns per unit of risk. The The Mosaic is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2,625  in The Mosaic on November 29, 2024 and sell it today you would lose (115.00) from holding The Mosaic or give up 4.38% of portfolio value over 90 days.

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

Balchem  vs.  The Mosaic

Balchem

Risk-Adjusted Performance

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.

Mosaic

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Mosaic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Mosaic is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Balchem and Mosaic

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

The idea behind Balchem and The Mosaic 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.

Check out your portfolio center.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.