Correlation Between EI Du and Balchem

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

By analyzing existing cross correlation between EI du Pont and Balchem, you can compare the effects of market volatilities on EI Du and Balchem 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 EI Du with a short position of Balchem. Check out your portfolio center. Please also check ongoing floating volatility patterns of EI Du and Balchem.

Diversification Opportunities for EI Du and Balchem

0.66

Correlation Coefficient

EI Du  Balchem

Poor diversification

The 3 months correlation between CTA-P-A and Balchem is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding EI du Pont and Balchem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balchem and EI Du 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 EI du Pont are associated (or correlated) with Balchem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balchem has no effect on the direction of EI Du i.e., EI Du and Balchem go up and down completely randomly.

Pair Corralation between EI Du and Balchem

Assuming the 90 days trading horizon EI Du is expected to generate 1.05 times less return on investment than Balchem. In addition to that, EI Du is 1.32 times more volatile than Balchem. It trades about 0.01 of its total potential returns per unit of risk. Balchem is currently generating about 0.02 per unit of volatility. If you would invest  15,366  in Balchem on October 9, 2024 and sell it today you would earn a total of  350.00  from holding Balchem or generate 2.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	73.94%
Values	Daily Returns

EI du Pont  vs.  Balchem

EI du Pont

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EI du Pont has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Preferred Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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.

Pair Trading with EI Du and Balchem

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

The idea behind EI du Pont and Balchem 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.