Correlation Between Balchem and Nike

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

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

Diversification Opportunities for Balchem and Nike

-0.05

Correlation Coefficient

Balchem  Nike

Good diversification

The 3 months correlation between Balchem and Nike is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Balchem and Nike Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nike Inc 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 Nike. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nike Inc has no effect on the direction of Balchem i.e., Balchem and Nike go up and down completely randomly.

Pair Corralation between Balchem and Nike

Given the investment horizon of 90 days Balchem is expected to generate 1.03 times more return on investment than Nike. However, Balchem is 1.03 times more volatile than Nike Inc. It trades about -0.06 of its potential returns per unit of risk. Nike Inc is currently generating about -0.1 per unit of risk. If you would invest  16,898  in Balchem on October 6, 2024 and sell it today you would lose (990.00) from holding Balchem or give up 5.86% of portfolio value over 90 days.

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

Balchem  vs.  Nike Inc

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.

Nike Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nike Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's forward-looking signals remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Balchem and Nike

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

The idea behind Balchem and Nike Inc 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.