Correlation Between Balchem and Crown

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

By analyzing existing cross correlation between Balchem and Crown Cork 7375, you can compare the effects of market volatilities on Balchem and Crown 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 Crown. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balchem and Crown.

Diversification Opportunities for Balchem and Crown

0.43

Correlation Coefficient

Balchem  Crown

Very weak diversification

The 3 months correlation between Balchem and Crown is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Balchem and Crown Cork 7375 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crown Cork 7375 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 Crown. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crown Cork 7375 has no effect on the direction of Balchem i.e., Balchem and Crown go up and down completely randomly.

Pair Corralation between Balchem and Crown

Given the investment horizon of 90 days Balchem is expected to under-perform the Crown. In addition to that, Balchem is 3.48 times more volatile than Crown Cork 7375. It trades about -0.15 of its total potential returns per unit of risk. Crown Cork 7375 is currently generating about 0.05 per unit of volatility. If you would invest  10,403  in Crown Cork 7375 on October 6, 2024 and sell it today you would earn a total of  92.00  from holding Crown Cork 7375 or generate 0.88% return on investment over 90 days.

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

Balchem  vs.  Crown Cork 7375

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.

Crown Cork 7375

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crown Cork 7375 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Crown is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Balchem and Crown

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

The idea behind Balchem and Crown Cork 7375 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.