Correlation Between Proficient Auto and Balchem

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

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

Diversification Opportunities for Proficient Auto and Balchem

0.25

Correlation Coefficient

Proficient Auto  Balchem

Modest diversification

The 3 months correlation between Proficient and Balchem is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Proficient Auto Logistics, and Balchem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balchem and Proficient Auto 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 Proficient Auto Logistics, 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 Proficient Auto i.e., Proficient Auto and Balchem go up and down completely randomly.

Pair Corralation between Proficient Auto and Balchem

Considering the 90-day investment horizon Proficient Auto Logistics, is expected to generate 2.52 times more return on investment than Balchem. However, Proficient Auto is 2.52 times more volatile than Balchem. It trades about 0.38 of its potential returns per unit of risk. Balchem is currently generating about -0.17 per unit of risk. If you would invest  808.00  in Proficient Auto Logistics, on October 27, 2024 and sell it today you would earn a total of  195.00  from holding Proficient Auto Logistics, or generate 24.13% return on investment over 90 days.

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

Proficient Auto Logistics,  vs.  Balchem

Proficient Auto Logi

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Proficient Auto Logistics, are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Proficient Auto disclosed solid returns over the last few months and may actually be approaching a breakup point.

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 Proficient Auto and Balchem

The main advantage of trading using opposite Proficient Auto and Balchem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Proficient Auto 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 Proficient Auto Logistics, 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.