Correlation Between Nike and Balchem

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

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

Diversification Opportunities for Nike and Balchem

-0.05

Correlation Coefficient

Nike  Balchem

Good diversification

The 3 months correlation between Nike and Balchem is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Balchem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balchem and Nike 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 Nike Inc 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 Nike i.e., Nike and Balchem go up and down completely randomly.

Pair Corralation between Nike and Balchem

Considering the 90-day investment horizon Nike Inc is expected to generate 1.03 times more return on investment than Balchem. However, Nike is 1.03 times more volatile than Balchem. It trades about -0.27 of its potential returns per unit of risk. Balchem is currently generating about -0.4 per unit of risk. If you would invest  7,858  in Nike Inc on October 6, 2024 and sell it today you would lose (527.00) from holding Nike Inc or give up 6.71% of portfolio value over 90 days.

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

Nike Inc  vs.  Balchem

Nike Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nike Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's forward-looking signals remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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 Nike and Balchem

The main advantage of trading using opposite Nike and Balchem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike 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 Nike Inc 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .