Correlation Between Balchem and NETGEAR

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

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

Diversification Opportunities for Balchem and NETGEAR

-0.56

Correlation Coefficient

Balchem  NETGEAR

Excellent diversification

The 3 months correlation between Balchem and NETGEAR is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Balchem and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR 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 NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of Balchem i.e., Balchem and NETGEAR go up and down completely randomly.

Pair Corralation between Balchem and NETGEAR

Given the investment horizon of 90 days Balchem is expected to generate 0.49 times more return on investment than NETGEAR. However, Balchem is 2.04 times less risky than NETGEAR. It trades about 0.0 of its potential returns per unit of risk. NETGEAR is currently generating about -0.06 per unit of risk. If you would invest  16,447  in Balchem on December 21, 2024 and sell it today you would lose (107.00) from holding Balchem or give up 0.65% of portfolio value over 90 days.

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

Balchem  vs.  NETGEAR

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.

NETGEAR

Risk-Adjusted Performance

Very Weak

Over the last 90 days NETGEAR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest inconsistent performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Balchem and NETGEAR

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

The idea behind Balchem and NETGEAR 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.