Correlation Between Balchem and ELDORADO

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

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

Diversification Opportunities for Balchem and ELDORADO

0.37

Correlation Coefficient

Balchem  ELDORADO

Weak diversification

The 3 months correlation between Balchem and ELDORADO is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Balchem and ELDORADO RESORTS INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELDORADO RESORTS 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 ELDORADO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELDORADO RESORTS INC has no effect on the direction of Balchem i.e., Balchem and ELDORADO go up and down completely randomly.

Pair Corralation between Balchem and ELDORADO

Given the investment horizon of 90 days Balchem is expected to under-perform the ELDORADO. In addition to that, Balchem is 7.58 times more volatile than ELDORADO RESORTS INC. It trades about -0.05 of its total potential returns per unit of risk. ELDORADO RESORTS INC is currently generating about -0.21 per unit of volatility. If you would invest  10,209  in ELDORADO RESORTS INC on October 26, 2024 and sell it today you would lose (197.00) from holding ELDORADO RESORTS INC or give up 1.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	83.05%
Values	Daily Returns

Balchem  vs.  ELDORADO RESORTS 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 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.

ELDORADO RESORTS INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ELDORADO RESORTS INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ELDORADO 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 ELDORADO

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

The idea behind Balchem and ELDORADO RESORTS 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.