Correlation Between Grocery Outlet and Balchem

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

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

Diversification Opportunities for Grocery Outlet and Balchem

-0.7

Correlation Coefficient

Grocery Outlet  Balchem

Excellent diversification

The 3 months correlation between Grocery and Balchem is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Grocery Outlet Holding and Balchem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balchem and Grocery Outlet 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 Grocery Outlet Holding 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 Grocery Outlet i.e., Grocery Outlet and Balchem go up and down completely randomly.

Pair Corralation between Grocery Outlet and Balchem

Allowing for the 90-day total investment horizon Grocery Outlet Holding is expected to under-perform the Balchem. In addition to that, Grocery Outlet is 3.83 times more volatile than Balchem. It trades about -0.02 of its total potential returns per unit of risk. Balchem is currently generating about 0.02 per unit of volatility. If you would invest  16,397  in Balchem on December 29, 2024 and sell it today you would earn a total of  214.00  from holding Balchem or generate 1.31% return on investment over 90 days.

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

Grocery Outlet Holding  vs.  Balchem

Grocery Outlet Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grocery Outlet Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Grocery Outlet is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Balchem

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Balchem are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Grocery Outlet and Balchem

The main advantage of trading using opposite Grocery Outlet and Balchem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grocery Outlet 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 Grocery Outlet Holding 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.