Correlation Between Cabot and Balchem
Can any of the company-specific risk be diversified away by investing in both Cabot and Balchem 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 Cabot and Balchem into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cabot and Balchem, you can compare the effects of market volatilities on Cabot and Balchem 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 Cabot with a short position of Balchem. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cabot and Balchem.
Diversification Opportunities for Cabot and Balchem
Very weak diversification
The 3 months correlation between Cabot and Balchem is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Cabot and Balchem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balchem and Cabot 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 Cabot are associated (or correlated) with Balchem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balchem has no effect on the direction of Cabot i.e., Cabot and Balchem go up and down completely randomly.
Pair Corralation between Cabot and Balchem
Considering the 90-day investment horizon Cabot is expected to generate 1.44 times more return on investment than Balchem. However, Cabot is 1.44 times more volatile than Balchem. It trades about 0.11 of its potential returns per unit of risk. Balchem is currently generating about 0.09 per unit of risk. If you would invest 7,222 in Cabot on August 29, 2024 and sell it today you would earn a total of 3,837 from holding Cabot or generate 53.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cabot vs. Balchem
Performance |
| Timeline |
| Cabot |
| Balchem |
Cabot and Balchem Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cabot and Balchem
The main advantage of trading using opposite Cabot and Balchem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cabot position performs unexpectedly, Balchem 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 Balchem will offset losses from the drop in Balchem's long position.The idea behind Cabot and Balchem pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Balchem vs. Direxion Daily FTSE | Balchem vs. Collegium Pharmaceutical | Balchem vs. KKR Co LP | Balchem vs. iShares Dividend and |
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 CEOs Directory module to screen CEOs from public companies around the world.
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