Correlation Between Balchem and 00108WAH3

Can any of the company-specific risk be diversified away by investing in both Balchem and 00108WAH3 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 00108WAH3 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Balchem and AEP TEX INC, you can compare the effects of market volatilities on Balchem and 00108WAH3 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 00108WAH3. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balchem and 00108WAH3.

Diversification Opportunities for Balchem and 00108WAH3

0.42

Correlation Coefficient

Balchem  00108WAH3

Very weak diversification

The 3 months correlation between Balchem and 00108WAH3 is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Balchem and AEP TEX INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AEP TEX 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 00108WAH3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AEP TEX INC has no effect on the direction of Balchem i.e., Balchem and 00108WAH3 go up and down completely randomly.

Pair Corralation between Balchem and 00108WAH3

Given the investment horizon of 90 days Balchem is expected to under-perform the 00108WAH3. In addition to that, Balchem is 1.02 times more volatile than AEP TEX INC. It trades about -0.3 of its total potential returns per unit of risk. AEP TEX INC is currently generating about -0.19 per unit of volatility. If you would invest  9,703  in AEP TEX INC on October 11, 2024 and sell it today you would lose (644.00) from holding AEP TEX INC or give up 6.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	80.49%
Values	Daily Returns

Balchem  vs.  AEP TEX 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 latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

AEP TEX INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AEP TEX INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for AEP TEX INC investors.

Pair Trading with Balchem and 00108WAH3

The main advantage of trading using opposite Balchem and 00108WAH3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balchem position performs unexpectedly, 00108WAH3 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 00108WAH3 will offset losses from the drop in 00108WAH3's long position.

The idea behind Balchem and AEP TEX 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 Transaction History module to view history of all your transactions and understand their impact on performance.