Correlation Between Balchem and Ecolab
Can any of the company-specific risk be diversified away by investing in both Balchem and Ecolab 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 Balchem and Ecolab into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Balchem and Ecolab Inc, you can compare the effects of market volatilities on Balchem and Ecolab 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 Balchem with a short position of Ecolab. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balchem and Ecolab.
Diversification Opportunities for Balchem and Ecolab
Very good diversification
The 3 months correlation between Balchem and Ecolab is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Balchem and Ecolab Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecolab Inc and Balchem 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 Balchem are associated (or correlated) with Ecolab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecolab Inc has no effect on the direction of Balchem i.e., Balchem and Ecolab go up and down completely randomly.
Pair Corralation between Balchem and Ecolab
Given the investment horizon of 90 days Balchem is expected to generate 1.65 times more return on investment than Ecolab. However, Balchem is 1.65 times more volatile than Ecolab Inc. It trades about 0.18 of its potential returns per unit of risk. Ecolab Inc is currently generating about -0.15 per unit of risk. If you would invest 17,146 in Balchem on August 26, 2024 and sell it today you would earn a total of 1,098 from holding Balchem or generate 6.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Balchem vs. Ecolab Inc
Performance |
| Timeline |
| Balchem |
| Ecolab Inc |
Balchem and Ecolab Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Balchem and Ecolab
The main advantage of trading using opposite Balchem and Ecolab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balchem position performs unexpectedly, Ecolab 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 Ecolab will offset losses from the drop in Ecolab's long position.| Balchem vs. Sensient Technologies | Balchem vs. Innospec | Balchem vs. Minerals Technologies | Balchem vs. Oil Dri |
| Ecolab vs. Linde plc Ordinary | Ecolab vs. PPG Industries | Ecolab vs. Sherwin Williams Co | Ecolab vs. LyondellBasell Industries NV |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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