Correlation Between Balchem and Sellas Life

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

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

Diversification Opportunities for Balchem and Sellas Life

0.49

Correlation Coefficient

Balchem  Sellas Life

Very weak diversification

The 3 months correlation between Balchem and Sellas is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Balchem and Sellas Life Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sellas Life Sciences 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 Sellas Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sellas Life Sciences has no effect on the direction of Balchem i.e., Balchem and Sellas Life go up and down completely randomly.

Pair Corralation between Balchem and Sellas Life

Given the investment horizon of 90 days Balchem is expected to under-perform the Sellas Life. But the stock apears to be less risky and, when comparing its historical volatility, Balchem is 4.24 times less risky than Sellas Life. The stock trades about -0.17 of its potential returns per unit of risk. The Sellas Life Sciences is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  101.00  in Sellas Life Sciences on October 27, 2024 and sell it today you would earn a total of  0.00  from holding Sellas Life Sciences or generate 0.0% return on investment over 90 days.

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

Balchem  vs.  Sellas Life Sciences

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.

Sellas Life Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sellas Life Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Balchem and Sellas Life

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

The idea behind Balchem and Sellas Life Sciences 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.