Correlation Between Balchem and Advanced Health

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

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

Diversification Opportunities for Balchem and Advanced Health

-0.24

Correlation Coefficient

Balchem  Advanced Health

Very good diversification

The 3 months correlation between Balchem and Advanced is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Balchem and Advanced Health Intelligence in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Health Inte 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 Advanced Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Health Inte has no effect on the direction of Balchem i.e., Balchem and Advanced Health go up and down completely randomly.

Pair Corralation between Balchem and Advanced Health

Given the investment horizon of 90 days Balchem is expected to generate 0.35 times more return on investment than Advanced Health. However, Balchem is 2.85 times less risky than Advanced Health. It trades about -0.1 of its potential returns per unit of risk. Advanced Health Intelligence is currently generating about -0.18 per unit of risk. If you would invest  16,929  in Balchem on October 10, 2024 and sell it today you would lose (1,423) from holding Balchem or give up 8.41% of portfolio value over 90 days.

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

Balchem  vs.  Advanced Health Intelligence

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 latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Advanced Health Inte

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advanced Health Intelligence has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Balchem and Advanced Health

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

The idea behind Balchem and Advanced Health Intelligence 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.