Correlation Between Balchem and SunOpta
Can any of the company-specific risk be diversified away by investing in both Balchem and SunOpta 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 SunOpta into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Balchem and SunOpta, you can compare the effects of market volatilities on Balchem and SunOpta 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 SunOpta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balchem and SunOpta.
Diversification Opportunities for Balchem and SunOpta
Poor diversification
The 3 months correlation between Balchem and SunOpta is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Balchem and SunOpta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SunOpta 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 SunOpta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SunOpta has no effect on the direction of Balchem i.e., Balchem and SunOpta go up and down completely randomly.
Pair Corralation between Balchem and SunOpta
Given the investment horizon of 90 days Balchem is expected to generate 3.21 times less return on investment than SunOpta. But when comparing it to its historical volatility, Balchem is 2.02 times less risky than SunOpta. It trades about 0.25 of its potential returns per unit of risk. SunOpta is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest 589.00 in SunOpta on August 25, 2024 and sell it today you would earn a total of 193.00 from holding SunOpta or generate 32.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Balchem vs. SunOpta
Performance |
| Timeline |
| Balchem |
| SunOpta |
Balchem and SunOpta Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Balchem and SunOpta
The main advantage of trading using opposite Balchem and SunOpta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balchem position performs unexpectedly, SunOpta 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 SunOpta will offset losses from the drop in SunOpta's long position.| Balchem vs. Sensient Technologies | Balchem vs. Innospec | Balchem vs. Minerals Technologies | Balchem vs. Oil Dri |
| SunOpta vs. Seneca Foods Corp | SunOpta vs. Central Garden Pet | SunOpta vs. Central Garden Pet | SunOpta vs. Natures Sunshine Products |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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