Correlation Between ESH Acquisition and Balchem

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

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

Diversification Opportunities for ESH Acquisition and Balchem

-0.31

Correlation Coefficient

ESH Acquisition  Balchem

Very good diversification

The 3 months correlation between ESH and Balchem is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding ESH Acquisition Corp and Balchem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balchem and ESH Acquisition 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 ESH Acquisition Corp 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 ESH Acquisition i.e., ESH Acquisition and Balchem go up and down completely randomly.

Pair Corralation between ESH Acquisition and Balchem

Given the investment horizon of 90 days ESH Acquisition Corp is expected to generate 1.15 times more return on investment than Balchem. However, ESH Acquisition is 1.15 times more volatile than Balchem. It trades about 0.07 of its potential returns per unit of risk. Balchem is currently generating about -0.1 per unit of risk. If you would invest  1,060  in ESH Acquisition Corp on October 10, 2024 and sell it today you would earn a total of  64.00  from holding ESH Acquisition Corp or generate 6.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

ESH Acquisition Corp  vs.  Balchem

ESH Acquisition Corp

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ESH Acquisition Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical indicators, ESH Acquisition may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 ESH Acquisition and Balchem

The main advantage of trading using opposite ESH Acquisition and Balchem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESH Acquisition 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 ESH Acquisition Corp 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.