Correlation Between Balchem and Chemours

Can any of the company-specific risk be diversified away by investing in both Balchem and Chemours 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 Chemours into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Balchem and Chemours Co, you can compare the effects of market volatilities on Balchem and Chemours 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 Chemours. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balchem and Chemours.

Diversification Opportunities for Balchem and Chemours

0.74

Correlation Coefficient

Balchem  Chemours

Poor diversification

The 3 months correlation between Balchem and Chemours is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Balchem and Chemours Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemours 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 Chemours. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemours has no effect on the direction of Balchem i.e., Balchem and Chemours go up and down completely randomly.

Pair Corralation between Balchem and Chemours

Given the investment horizon of 90 days Balchem is expected to generate 4.98 times less return on investment than Chemours. But when comparing it to its historical volatility, Balchem is 2.42 times less risky than Chemours. It trades about 0.05 of its potential returns per unit of risk. Chemours Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,826  in Chemours Co on September 5, 2024 and sell it today you would earn a total of  337.00  from holding Chemours Co or generate 18.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Balchem  vs.  Chemours Co

Balchem

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Balchem are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Balchem is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Chemours

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chemours Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Chemours exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Balchem and Chemours

The main advantage of trading using opposite Balchem and Chemours positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balchem position performs unexpectedly, Chemours 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 Chemours will offset losses from the drop in Chemours' long position.

The idea behind Balchem and Chemours Co 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.

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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.