Correlation Between Balchem and 90041LAF2

Can any of the company-specific risk be diversified away by investing in both Balchem and 90041LAF2 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 90041LAF2 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Balchem and US90041LAF22, you can compare the effects of market volatilities on Balchem and 90041LAF2 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 90041LAF2. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balchem and 90041LAF2.

Diversification Opportunities for Balchem and 90041LAF2

0.43

Correlation Coefficient

Balchem  90041LAF2

Very weak diversification

The 3 months correlation between Balchem and 90041LAF2 is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Balchem and US90041LAF22 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US90041LAF22 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 90041LAF2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US90041LAF22 has no effect on the direction of Balchem i.e., Balchem and 90041LAF2 go up and down completely randomly.

Pair Corralation between Balchem and 90041LAF2

Given the investment horizon of 90 days Balchem is expected to under-perform the 90041LAF2. In addition to that, Balchem is 5.92 times more volatile than US90041LAF22. It trades about -0.06 of its total potential returns per unit of risk. US90041LAF22 is currently generating about -0.07 per unit of volatility. If you would invest  9,975  in US90041LAF22 on October 7, 2024 and sell it today you would lose (44.00) from holding US90041LAF22 or give up 0.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	42.86%
Values	Daily Returns

Balchem  vs.  US90041LAF22

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.

US90041LAF22

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US90041LAF22 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 90041LAF2 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 90041LAF2

The main advantage of trading using opposite Balchem and 90041LAF2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balchem position performs unexpectedly, 90041LAF2 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 90041LAF2 will offset losses from the drop in 90041LAF2's long position.

The idea behind Balchem and US90041LAF22 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.