Correlation Between Kaiser Aluminum and Balchem

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

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

Diversification Opportunities for Kaiser Aluminum and Balchem

0.85

Correlation Coefficient

Kaiser Aluminum  Balchem

Very poor diversification

The 3 months correlation between Kaiser and Balchem is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Kaiser Aluminum and Balchem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balchem and Kaiser Aluminum 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 Kaiser Aluminum 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 Kaiser Aluminum i.e., Kaiser Aluminum and Balchem go up and down completely randomly.

Pair Corralation between Kaiser Aluminum and Balchem

Given the investment horizon of 90 days Kaiser Aluminum is expected to under-perform the Balchem. In addition to that, Kaiser Aluminum is 1.21 times more volatile than Balchem. It trades about -0.44 of its total potential returns per unit of risk. Balchem is currently generating about -0.41 per unit of volatility. If you would invest  17,504  in Balchem on October 10, 2024 and sell it today you would lose (1,795) from holding Balchem or give up 10.25% of portfolio value over 90 days.

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

Kaiser Aluminum  vs.  Balchem

Kaiser Aluminum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kaiser Aluminum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Kaiser Aluminum is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private 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 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 Kaiser Aluminum and Balchem

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

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.