Correlation Between Oil Dri and Balchem

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

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

Diversification Opportunities for Oil Dri and Balchem

0.59

Correlation Coefficient

Oil Dri  Balchem

Very weak diversification

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

Pair Corralation between Oil Dri and Balchem

Considering the 90-day investment horizon Oil Dri is expected to generate 1.57 times more return on investment than Balchem. However, Oil Dri is 1.57 times more volatile than Balchem. It trades about 0.06 of its potential returns per unit of risk. Balchem is currently generating about 0.02 per unit of risk. If you would invest  4,355  in Oil Dri on December 28, 2024 and sell it today you would earn a total of  290.00  from holding Oil Dri or generate 6.66% return on investment over 90 days.

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

Oil Dri  vs.  Balchem

Oil Dri

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Oil Dri are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting fundamental indicators, Oil Dri 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 Oil Dri and Balchem

The main advantage of trading using opposite Oil Dri and Balchem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oil Dri 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 Oil Dri 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.