Correlation Between Balchem and Western Sierra
Can any of the company-specific risk be diversified away by investing in both Balchem and Western Sierra 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 Western Sierra into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Balchem and Western Sierra Mining, you can compare the effects of market volatilities on Balchem and Western Sierra 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 Western Sierra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balchem and Western Sierra.
Diversification Opportunities for Balchem and Western Sierra
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Balchem and Western is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Balchem and Western Sierra Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Sierra Mining 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 Western Sierra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Sierra Mining has no effect on the direction of Balchem i.e., Balchem and Western Sierra go up and down completely randomly.
Pair Corralation between Balchem and Western Sierra
Given the investment horizon of 90 days Balchem is expected to generate 121.84 times less return on investment than Western Sierra. But when comparing it to its historical volatility, Balchem is 66.58 times less risky than Western Sierra. It trades about 0.05 of its potential returns per unit of risk. Western Sierra Mining is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 12.00 in Western Sierra Mining on August 27, 2024 and sell it today you would lose (11.32) from holding Western Sierra Mining or give up 94.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Balchem vs. Western Sierra Mining
Performance |
| Timeline |
| Balchem |
| Western Sierra Mining |
Balchem and Western Sierra Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Balchem and Western Sierra
The main advantage of trading using opposite Balchem and Western Sierra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balchem position performs unexpectedly, Western Sierra 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 Western Sierra will offset losses from the drop in Western Sierra's long position.| Balchem vs. Sensient Technologies | Balchem vs. Innospec | Balchem vs. Minerals Technologies | Balchem vs. Oil Dri |
| Western Sierra vs. Indoor Harvest Corp | Western Sierra vs. Speakeasy Cannabis Club | Western Sierra vs. Link Reservations |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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