Correlation Between Balchem and Lifeway Foods
Can any of the company-specific risk be diversified away by investing in both Balchem and Lifeway Foods 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 Lifeway Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Balchem and Lifeway Foods, you can compare the effects of market volatilities on Balchem and Lifeway Foods 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 Lifeway Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balchem and Lifeway Foods.
Diversification Opportunities for Balchem and Lifeway Foods
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Balchem and Lifeway is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Balchem and Lifeway Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifeway Foods 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 Lifeway Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifeway Foods has no effect on the direction of Balchem i.e., Balchem and Lifeway Foods go up and down completely randomly.
Pair Corralation between Balchem and Lifeway Foods
Given the investment horizon of 90 days Balchem is expected to generate 0.87 times more return on investment than Lifeway Foods. However, Balchem is 1.15 times less risky than Lifeway Foods. It trades about -0.08 of its potential returns per unit of risk. Lifeway Foods is currently generating about -0.21 per unit of risk. If you would invest 16,300 in Balchem on November 1, 2024 and sell it today you would lose (325.50) from holding Balchem or give up 2.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Balchem vs. Lifeway Foods
Performance |
| Timeline |
| Balchem |
| Lifeway Foods |
Balchem and Lifeway Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Balchem and Lifeway Foods
The main advantage of trading using opposite Balchem and Lifeway Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balchem position performs unexpectedly, Lifeway Foods 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 Lifeway Foods will offset losses from the drop in Lifeway Foods' long position.| Balchem vs. Sensient Technologies | Balchem vs. Innospec | Balchem vs. Minerals Technologies | Balchem vs. Oil Dri |
| Lifeway Foods vs. Seneca Foods Corp | Lifeway Foods vs. Central Garden Pet | Lifeway Foods vs. Central Garden Pet | Lifeway Foods vs. Lifevantage |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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