Correlation Between Balchem and NewMarket
Can any of the company-specific risk be diversified away by investing in both Balchem and NewMarket 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 NewMarket into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Balchem and NewMarket, you can compare the effects of market volatilities on Balchem and NewMarket 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 NewMarket. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balchem and NewMarket.
Diversification Opportunities for Balchem and NewMarket
Weak diversification
The 3 months correlation between Balchem and NewMarket is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Balchem and NewMarket in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewMarket 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 NewMarket. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewMarket has no effect on the direction of Balchem i.e., Balchem and NewMarket go up and down completely randomly.
Pair Corralation between Balchem and NewMarket
Given the investment horizon of 90 days Balchem is expected to generate 1.59 times less return on investment than NewMarket. In addition to that, Balchem is 1.06 times more volatile than NewMarket. It trades about 0.05 of its total potential returns per unit of risk. NewMarket is currently generating about 0.09 per unit of volatility. If you would invest 30,660 in NewMarket on August 24, 2024 and sell it today you would earn a total of 23,605 from holding NewMarket or generate 76.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Balchem vs. NewMarket
Performance |
| Timeline |
| Balchem |
| NewMarket |
Balchem and NewMarket Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Balchem and NewMarket
The main advantage of trading using opposite Balchem and NewMarket positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balchem position performs unexpectedly, NewMarket 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 NewMarket will offset losses from the drop in NewMarket's long position.| Balchem vs. Eshallgo Class A | Balchem vs. Amtech Systems | Balchem vs. Gold Fields Ltd | Balchem vs. Aegean Airlines SA |
| NewMarket vs. Eshallgo Class A | NewMarket vs. Amtech Systems | NewMarket vs. Gold Fields Ltd | NewMarket vs. Aegean Airlines SA |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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