Correlation Between 90041LAF2 and Balchem

Can any of the company-specific risk be diversified away by investing in both 90041LAF2 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 90041LAF2 and Balchem into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between US90041LAF22 and Balchem, you can compare the effects of market volatilities on 90041LAF2 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 90041LAF2 with a short position of Balchem. Check out your portfolio center. Please also check ongoing floating volatility patterns of 90041LAF2 and Balchem.

Diversification Opportunities for 90041LAF2 and Balchem

0.18

Correlation Coefficient

90041LAF2  Balchem

Average diversification

The 3 months correlation between 90041LAF2 and Balchem is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding US90041LAF22 and Balchem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balchem and 90041LAF2 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 US90041LAF22 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 90041LAF2 i.e., 90041LAF2 and Balchem go up and down completely randomly.

Pair Corralation between 90041LAF2 and Balchem

Assuming the 90 days trading horizon US90041LAF22 is expected to generate 0.27 times more return on investment than Balchem. However, US90041LAF22 is 3.73 times less risky than Balchem. It trades about -0.15 of its potential returns per unit of risk. Balchem is currently generating about -0.12 per unit of risk. If you would invest  9,959  in US90041LAF22 on October 22, 2024 and sell it today you would lose (28.00) from holding US90041LAF22 or give up 0.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	33.33%
Values	Daily Returns

US90041LAF22  vs.  Balchem

US90041LAF22

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US90041LAF22 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 90041LAF2 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the 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 rather sound basic indicators, Balchem is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with 90041LAF2 and Balchem

The main advantage of trading using opposite 90041LAF2 and Balchem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 90041LAF2 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 US90041LAF22 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.