Correlation Between Balchem and Eastman Chemical
Can any of the company-specific risk be diversified away by investing in both Balchem and Eastman Chemical 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 Eastman Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Balchem and Eastman Chemical, you can compare the effects of market volatilities on Balchem and Eastman Chemical 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 Eastman Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balchem and Eastman Chemical.
Diversification Opportunities for Balchem and Eastman Chemical
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Balchem and Eastman is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Balchem and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical 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 Eastman Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastman Chemical has no effect on the direction of Balchem i.e., Balchem and Eastman Chemical go up and down completely randomly.
Pair Corralation between Balchem and Eastman Chemical
Given the investment horizon of 90 days Balchem is expected to generate 0.97 times more return on investment than Eastman Chemical. However, Balchem is 1.03 times less risky than Eastman Chemical. It trades about 0.2 of its potential returns per unit of risk. Eastman Chemical is currently generating about -0.01 per unit of risk. If you would invest 17,079 in Balchem on August 28, 2024 and sell it today you would earn a total of 1,190 from holding Balchem or generate 6.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Balchem vs. Eastman Chemical
Performance |
| Timeline |
| Balchem |
| Eastman Chemical |
Balchem and Eastman Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Balchem and Eastman Chemical
The main advantage of trading using opposite Balchem and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balchem position performs unexpectedly, Eastman Chemical 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 Eastman Chemical will offset losses from the drop in Eastman Chemical's long position.| Balchem vs. Sensient Technologies | Balchem vs. Innospec | Balchem vs. Minerals Technologies | Balchem vs. Oil Dri |
| Eastman Chemical vs. Olin Corporation | Eastman Chemical vs. Cabot | Eastman Chemical vs. Kronos Worldwide | Eastman Chemical 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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