Correlation Between Kingboard Chemical and Balchem

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

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

Diversification Opportunities for Kingboard Chemical and Balchem

-0.8

Correlation Coefficient

Kingboard Chemical  Balchem

Pay attention - limited upside

The 3 months correlation between Kingboard and Balchem is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Kingboard Chemical Holdings and Balchem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balchem and Kingboard Chemical 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 Kingboard Chemical Holdings 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 Kingboard Chemical i.e., Kingboard Chemical and Balchem go up and down completely randomly.

Pair Corralation between Kingboard Chemical and Balchem

Assuming the 90 days horizon Kingboard Chemical Holdings is expected to under-perform the Balchem. But the pink sheet apears to be less risky and, when comparing its historical volatility, Kingboard Chemical Holdings is 1.07 times less risky than Balchem. The pink sheet trades about -0.02 of its potential returns per unit of risk. The Balchem is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  13,787  in Balchem on October 24, 2024 and sell it today you would earn a total of  2,375  from holding Balchem or generate 17.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Kingboard Chemical Holdings  vs.  Balchem

Kingboard Chemical

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kingboard Chemical Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Kingboard Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the 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 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 Kingboard Chemical and Balchem

The main advantage of trading using opposite Kingboard Chemical and Balchem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kingboard Chemical 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 Kingboard Chemical Holdings 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.