Correlation Between Balchem and HONEYWELL

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

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

Diversification Opportunities for Balchem and HONEYWELL

-0.23

Correlation Coefficient

Balchem  HONEYWELL

Very good diversification

The 3 months correlation between Balchem and HONEYWELL is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Balchem and HONEYWELL INTL INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HONEYWELL INTL 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 HONEYWELL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HONEYWELL INTL INC has no effect on the direction of Balchem i.e., Balchem and HONEYWELL go up and down completely randomly.

Pair Corralation between Balchem and HONEYWELL

Given the investment horizon of 90 days Balchem is expected to under-perform the HONEYWELL. In addition to that, Balchem is 1.2 times more volatile than HONEYWELL INTL INC. It trades about -0.01 of its total potential returns per unit of risk. HONEYWELL INTL INC is currently generating about 0.16 per unit of volatility. If you would invest  7,699  in HONEYWELL INTL INC on December 25, 2024 and sell it today you would earn a total of  420.00  from holding HONEYWELL INTL INC or generate 5.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	49.15%
Values	Daily Returns

Balchem  vs.  HONEYWELL INTL INC

Balchem

Risk-Adjusted Performance

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.

HONEYWELL INTL INC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HONEYWELL INTL INC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, HONEYWELL may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Balchem and HONEYWELL

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

The idea behind Balchem and HONEYWELL INTL 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.