Correlation Between REX American and Balchem
Can any of the company-specific risk be diversified away by investing in both REX American 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 REX American and Balchem into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between REX American Resources and Balchem, you can compare the effects of market volatilities on REX American 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 REX American with a short position of Balchem. Check out your portfolio center. Please also check ongoing floating volatility patterns of REX American and Balchem.
Diversification Opportunities for REX American and Balchem
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between REX and Balchem is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding REX American Resources and Balchem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balchem and REX American 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 REX American Resources 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 REX American i.e., REX American and Balchem go up and down completely randomly.
Pair Corralation between REX American and Balchem
Considering the 90-day investment horizon REX American Resources is expected to under-perform the Balchem. In addition to that, REX American is 1.2 times more volatile than Balchem. It trades about -0.08 of its total potential returns per unit of risk. Balchem is currently generating about 0.04 per unit of volatility. If you would invest 15,858 in Balchem on November 3, 2024 and sell it today you would earn a total of 138.00 from holding Balchem or generate 0.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
REX American Resources vs. Balchem
Performance |
| Timeline |
| REX American Resources |
| Balchem |
REX American and Balchem Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with REX American and Balchem
The main advantage of trading using opposite REX American and Balchem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if REX American 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.| REX American vs. Innospec | REX American vs. H B Fuller | REX American vs. Quaker Chemical | REX American vs. Minerals Technologies |
| 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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