Correlation Between WK Kellogg and Balchem

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

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

Diversification Opportunities for WK Kellogg and Balchem

0.45

Correlation Coefficient

WK Kellogg  Balchem

Very weak diversification

The 3 months correlation between KLG and Balchem is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding WK Kellogg Co and Balchem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balchem and WK Kellogg 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 WK Kellogg Co 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 WK Kellogg i.e., WK Kellogg and Balchem go up and down completely randomly.

Pair Corralation between WK Kellogg and Balchem

Considering the 90-day investment horizon WK Kellogg Co is expected to under-perform the Balchem. In addition to that, WK Kellogg is 2.34 times more volatile than Balchem. It trades about -0.42 of its total potential returns per unit of risk. Balchem is currently generating about -0.5 per unit of volatility. If you would invest  17,728  in Balchem on October 12, 2024 and sell it today you would lose (2,019) from holding Balchem or give up 11.39% of portfolio value over 90 days.

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

WK Kellogg Co  vs.  Balchem

WK Kellogg

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WK Kellogg Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, WK Kellogg is not utilizing all of its potentials. The recent 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 WK Kellogg and Balchem

The main advantage of trading using opposite WK Kellogg and Balchem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WK Kellogg 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 WK Kellogg Co 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.