Correlation Between Lifeway Foods and Balchem
Can any of the company-specific risk be diversified away by investing in both Lifeway Foods 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 Lifeway Foods and Balchem into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lifeway Foods and Balchem, you can compare the effects of market volatilities on Lifeway Foods 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 Lifeway Foods with a short position of Balchem. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lifeway Foods and Balchem.
Diversification Opportunities for Lifeway Foods and Balchem
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lifeway and Balchem is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods and Balchem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balchem and Lifeway Foods 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 Lifeway Foods 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 Lifeway Foods i.e., Lifeway Foods and Balchem go up and down completely randomly.
Pair Corralation between Lifeway Foods and Balchem
Given the investment horizon of 90 days Lifeway Foods is expected to under-perform the Balchem. In addition to that, Lifeway Foods is 1.15 times more volatile than Balchem. It trades about -0.21 of its total potential returns per unit of risk. Balchem is currently generating about -0.08 per unit of volatility. If you would invest 16,300 in Balchem on November 1, 2024 and sell it today you would lose (325.50) from holding Balchem or give up 2.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lifeway Foods vs. Balchem
Performance |
| Timeline |
| Lifeway Foods |
| Balchem |
Lifeway Foods and Balchem Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lifeway Foods and Balchem
The main advantage of trading using opposite Lifeway Foods and Balchem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lifeway Foods 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.| Lifeway Foods vs. Seneca Foods Corp | Lifeway Foods vs. Central Garden Pet | Lifeway Foods vs. Central Garden Pet | Lifeway Foods vs. Lifevantage |
| Balchem vs. Sensient Technologies | Balchem vs. Innospec | Balchem vs. Minerals Technologies | Balchem vs. Oil Dri |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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