Correlation Between Balchem and Altria

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

By analyzing existing cross correlation between Balchem and Altria Group 995, you can compare the effects of market volatilities on Balchem and Altria 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 Altria. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balchem and Altria.

Diversification Opportunities for Balchem and Altria

0.14

Correlation Coefficient

Balchem  Altria

Average diversification

The 3 months correlation between Balchem and Altria is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Balchem and Altria Group 995 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altria Group 995 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 Altria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altria Group 995 has no effect on the direction of Balchem i.e., Balchem and Altria go up and down completely randomly.

Pair Corralation between Balchem and Altria

Given the investment horizon of 90 days Balchem is expected to under-perform the Altria. But the stock apears to be less risky and, when comparing its historical volatility, Balchem is 1.54 times less risky than Altria. The stock trades about -0.5 of its potential returns per unit of risk. The Altria Group 995 is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  14,092  in Altria Group 995 on October 10, 2024 and sell it today you would lose (302.00) from holding Altria Group 995 or give up 2.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	55.0%
Values	Daily Returns

Balchem  vs.  Altria Group 995

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 unsteady 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.

Altria Group 995

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Altria Group 995 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Altria is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Balchem and Altria

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

The idea behind Balchem and Altria Group 995 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.