Correlation Between Balchem and Nabors Industries

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

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

Diversification Opportunities for Balchem and Nabors Industries

0.47

Correlation Coefficient

Balchem  Nabors Industries

Very weak diversification

The 3 months correlation between Balchem and Nabors is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Balchem and Nabors Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nabors Industries 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 Nabors Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nabors Industries has no effect on the direction of Balchem i.e., Balchem and Nabors Industries go up and down completely randomly.

Pair Corralation between Balchem and Nabors Industries

Given the investment horizon of 90 days Balchem is expected to under-perform the Nabors Industries. But the stock apears to be less risky and, when comparing its historical volatility, Balchem is 8.11 times less risky than Nabors Industries. The stock trades about -0.4 of its potential returns per unit of risk. The Nabors Industries is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  490.00  in Nabors Industries on October 6, 2024 and sell it today you would lose (50.00) from holding Nabors Industries or give up 10.2% of portfolio value over 90 days.

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

Balchem  vs.  Nabors Industries

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.

Nabors Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nabors Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile 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 Nabors Industries

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

The idea behind Balchem and Nabors Industries 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.