Correlation Between Sellas Life and Balchem

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

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

Diversification Opportunities for Sellas Life and Balchem

-0.16

Correlation Coefficient

Sellas Life  Balchem

Good diversification

The 3 months correlation between Sellas and Balchem is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Sellas Life Sciences and Balchem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balchem and Sellas Life 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 Sellas Life Sciences 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 Sellas Life i.e., Sellas Life and Balchem go up and down completely randomly.

Pair Corralation between Sellas Life and Balchem

Considering the 90-day investment horizon Sellas Life Sciences is expected to generate 5.67 times more return on investment than Balchem. However, Sellas Life is 5.67 times more volatile than Balchem. It trades about 0.07 of its potential returns per unit of risk. Balchem is currently generating about 0.01 per unit of risk. If you would invest  90.00  in Sellas Life Sciences on December 19, 2024 and sell it today you would earn a total of  18.00  from holding Sellas Life Sciences or generate 20.0% return on investment over 90 days.

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

Sellas Life Sciences  vs.  Balchem

Sellas Life Sciences

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sellas Life Sciences are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Sellas Life unveiled solid returns over the last few months and may actually be approaching a breakup point.

Balchem

Risk-Adjusted Performance

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 Sellas Life and Balchem

The main advantage of trading using opposite Sellas Life and Balchem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sellas Life 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 Sellas Life Sciences 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.