Correlation Between HONEYWELL and Balchem

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

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

Diversification Opportunities for HONEYWELL and Balchem

-0.21

Correlation Coefficient

HONEYWELL  Balchem

Very good diversification

The 3 months correlation between HONEYWELL and Balchem is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding HONEYWELL INTL INC and Balchem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balchem and HONEYWELL 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 HONEYWELL INTL 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 HONEYWELL i.e., HONEYWELL and Balchem go up and down completely randomly.

Pair Corralation between HONEYWELL and Balchem

Assuming the 90 days trading horizon HONEYWELL INTL INC is expected to under-perform the Balchem. But the bond apears to be less risky and, when comparing its historical volatility, HONEYWELL INTL INC is 1.14 times less risky than Balchem. The bond trades about -0.13 of its potential returns per unit of risk. The Balchem is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  16,929  in Balchem on October 10, 2024 and sell it today you would lose (1,423) from holding Balchem or give up 8.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	49.18%
Values	Daily Returns

HONEYWELL INTL INC  vs.  Balchem

HONEYWELL INTL INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HONEYWELL INTL INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for HONEYWELL INTL INC investors.

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 latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with HONEYWELL and Balchem

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

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.