Correlation Between Balchem and PPG Industries

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

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

Diversification Opportunities for Balchem and PPG Industries

-0.11

Correlation Coefficient

Balchem  PPG Industries

Good diversification

The 3 months correlation between Balchem and PPG is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Balchem and PPG Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPG 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 PPG Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPG Industries has no effect on the direction of Balchem i.e., Balchem and PPG Industries go up and down completely randomly.

Pair Corralation between Balchem and PPG Industries

Given the investment horizon of 90 days Balchem is expected to under-perform the PPG Industries. In addition to that, Balchem is 1.16 times more volatile than PPG Industries. It trades about -0.44 of its total potential returns per unit of risk. PPG Industries is currently generating about -0.22 per unit of volatility. If you would invest  12,579  in PPG Industries on September 24, 2024 and sell it today you would lose (589.00) from holding PPG Industries or give up 4.68% of portfolio value over 90 days.

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

Balchem  vs.  PPG 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.

PPG Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PPG Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PPG Industries is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Balchem and PPG Industries

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

The idea behind Balchem and PPG 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.