Correlation Between Linde Plc and Balchem

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

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

Diversification Opportunities for Linde Plc and Balchem

0.59

Correlation Coefficient

Linde Plc  Balchem

Very weak diversification

The 3 months correlation between Linde and Balchem is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Linde plc Ordinary and Balchem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balchem and Linde Plc 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 Linde plc Ordinary 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 Linde Plc i.e., Linde Plc and Balchem go up and down completely randomly.

Pair Corralation between Linde Plc and Balchem

Considering the 90-day investment horizon Linde plc Ordinary is expected to generate 0.69 times more return on investment than Balchem. However, Linde plc Ordinary is 1.46 times less risky than Balchem. It trades about 0.2 of its potential returns per unit of risk. Balchem is currently generating about 0.02 per unit of risk. If you would invest  41,627  in Linde plc Ordinary on December 28, 2024 and sell it today you would earn a total of  4,846  from holding Linde plc Ordinary or generate 11.64% return on investment over 90 days.

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

Linde plc Ordinary  vs.  Balchem

Linde plc Ordinary

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Linde plc Ordinary are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile forward indicators, Linde Plc may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 Linde Plc and Balchem

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