Correlation Between Balchem and Kaiser Aluminum
Can any of the company-specific risk be diversified away by investing in both Balchem and Kaiser Aluminum 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 Kaiser Aluminum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Balchem and Kaiser Aluminum, you can compare the effects of market volatilities on Balchem and Kaiser Aluminum 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 Kaiser Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balchem and Kaiser Aluminum.
Diversification Opportunities for Balchem and Kaiser Aluminum
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Balchem and Kaiser is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Balchem and Kaiser Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaiser Aluminum 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 Kaiser Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaiser Aluminum has no effect on the direction of Balchem i.e., Balchem and Kaiser Aluminum go up and down completely randomly.
Pair Corralation between Balchem and Kaiser Aluminum
Given the investment horizon of 90 days Balchem is expected to under-perform the Kaiser Aluminum. But the stock apears to be less risky and, when comparing its historical volatility, Balchem is 1.79 times less risky than Kaiser Aluminum. The stock trades about -0.05 of its potential returns per unit of risk. The Kaiser Aluminum is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 6,834 in Kaiser Aluminum on October 25, 2024 and sell it today you would earn a total of 489.00 from holding Kaiser Aluminum or generate 7.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Balchem vs. Kaiser Aluminum
Performance |
| Timeline |
| Balchem |
| Kaiser Aluminum |
Balchem and Kaiser Aluminum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Balchem and Kaiser Aluminum
The main advantage of trading using opposite Balchem and Kaiser Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balchem position performs unexpectedly, Kaiser Aluminum 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 Kaiser Aluminum will offset losses from the drop in Kaiser Aluminum's long position.| Balchem vs. Sensient Technologies | Balchem vs. Innospec | Balchem vs. Minerals Technologies | Balchem vs. Oil Dri |
| Kaiser Aluminum vs. Bank of America | Kaiser Aluminum vs. RLJ Lodging Trust | Kaiser Aluminum vs. PennyMac Finl Svcs | Kaiser Aluminum vs. Brandywine Realty Trust |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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