Correlation Between Balchem and SPACE
Can any of the company-specific risk be diversified away by investing in both Balchem and SPACE 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 SPACE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Balchem and SPACE, you can compare the effects of market volatilities on Balchem and SPACE 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 SPACE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balchem and SPACE.
Diversification Opportunities for Balchem and SPACE
Poor diversification
The 3 months correlation between Balchem and SPACE is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Balchem and SPACE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPACE 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 SPACE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPACE has no effect on the direction of Balchem i.e., Balchem and SPACE go up and down completely randomly.
Pair Corralation between Balchem and SPACE
Given the investment horizon of 90 days Balchem is expected to generate 402.83 times less return on investment than SPACE. But when comparing it to its historical volatility, Balchem is 116.11 times less risky than SPACE. It trades about 0.05 of its potential returns per unit of risk. SPACE is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 0.00 in SPACE on September 3, 2024 and sell it today you would earn a total of 59.00 from holding SPACE or generate 9.223372036854776E16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 61.82% |
| Values | Daily Returns |
Balchem vs. SPACE
Performance |
| Timeline |
| Balchem |
| SPACE |
Balchem and SPACE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Balchem and SPACE
The main advantage of trading using opposite Balchem and SPACE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balchem position performs unexpectedly, SPACE 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 SPACE will offset losses from the drop in SPACE's long position.The idea behind Balchem and SPACE 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.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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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