Correlation Between Balchem and SkyWest
Can any of the company-specific risk be diversified away by investing in both Balchem and SkyWest 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 SkyWest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Balchem and SkyWest, you can compare the effects of market volatilities on Balchem and SkyWest 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 SkyWest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balchem and SkyWest.
Diversification Opportunities for Balchem and SkyWest
Weak diversification
The 3 months correlation between Balchem and SkyWest is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Balchem and SkyWest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SkyWest 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 SkyWest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SkyWest has no effect on the direction of Balchem i.e., Balchem and SkyWest go up and down completely randomly.
Pair Corralation between Balchem and SkyWest
Given the investment horizon of 90 days Balchem is expected to generate 4.99 times less return on investment than SkyWest. But when comparing it to its historical volatility, Balchem is 1.51 times less risky than SkyWest. It trades about 0.05 of its potential returns per unit of risk. SkyWest is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 5,455 in SkyWest on October 25, 2024 and sell it today you would earn a total of 6,151 from holding SkyWest or generate 112.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Balchem vs. SkyWest
Performance |
| Timeline |
| Balchem |
| SkyWest |
Balchem and SkyWest Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Balchem and SkyWest
The main advantage of trading using opposite Balchem and SkyWest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balchem position performs unexpectedly, SkyWest 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 SkyWest will offset losses from the drop in SkyWest's long position.| Balchem vs. Sensient Technologies | Balchem vs. Innospec | Balchem vs. Minerals Technologies | Balchem vs. Oil Dri |
| SkyWest vs. Copa Holdings SA | SkyWest vs. Sun Country Airlines | SkyWest vs. Air Transport Services | SkyWest vs. Frontier Group Holdings |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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