Correlation Between East Africa and Balchem

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

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

Diversification Opportunities for East Africa and Balchem

0.0

Correlation Coefficient

East Africa  Balchem

Pay attention - limited upside

The 3 months correlation between East and Balchem is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding East Africa Metals and Balchem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balchem and East Africa 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 East Africa Metals 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 East Africa i.e., East Africa and Balchem go up and down completely randomly.

Pair Corralation between East Africa and Balchem

Assuming the 90 days horizon East Africa Metals is expected to generate 10.76 times more return on investment than Balchem. However, East Africa is 10.76 times more volatile than Balchem. It trades about 0.06 of its potential returns per unit of risk. Balchem is currently generating about 0.03 per unit of risk. If you would invest  5.20  in East Africa Metals on October 12, 2024 and sell it today you would earn a total of  5.80  from holding East Africa Metals or generate 111.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.94%
Values	Daily Returns

East Africa Metals  vs.  Balchem

East Africa Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days East Africa Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, East Africa is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 uncertain 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 East Africa and Balchem

The main advantage of trading using opposite East Africa and Balchem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East Africa 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 East Africa Metals 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..