Correlation Between Avantor and Balchem
Can any of the company-specific risk be diversified away by investing in both Avantor 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 Avantor and Balchem into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avantor and Balchem, you can compare the effects of market volatilities on Avantor 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 Avantor with a short position of Balchem. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avantor and Balchem.
Diversification Opportunities for Avantor and Balchem
Very good diversification
The 3 months correlation between Avantor and Balchem is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Avantor and Balchem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balchem and Avantor 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 Avantor 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 Avantor i.e., Avantor and Balchem go up and down completely randomly.
Pair Corralation between Avantor and Balchem
Given the investment horizon of 90 days Avantor is expected to under-perform the Balchem. But the stock apears to be less risky and, when comparing its historical volatility, Avantor is 1.14 times less risky than Balchem. The stock trades about -0.28 of its potential returns per unit of risk. The Balchem is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 17,079 in Balchem on August 27, 2024 and sell it today you would earn a total of 1,165 from holding Balchem or generate 6.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Avantor vs. Balchem
Performance |
| Timeline |
| Avantor |
| Balchem |
Avantor and Balchem Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avantor and Balchem
The main advantage of trading using opposite Avantor and Balchem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avantor 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.| Avantor vs. Ashland Global Holdings | Avantor vs. H B Fuller | Avantor vs. Element Solutions | Avantor vs. Balchem |
| Balchem vs. Sensient Technologies | Balchem vs. Innospec | Balchem vs. Minerals Technologies | Balchem vs. Oil Dri |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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