Correlation Between Balchem and Flexible Solutions

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

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

Diversification Opportunities for Balchem and Flexible Solutions

0.4

Correlation Coefficient

Balchem  Flexible Solutions

Very weak diversification

The 3 months correlation between Balchem and Flexible is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Balchem and Flexible Solutions Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flexible Solutions 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 Flexible Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flexible Solutions has no effect on the direction of Balchem i.e., Balchem and Flexible Solutions go up and down completely randomly.

Pair Corralation between Balchem and Flexible Solutions

Given the investment horizon of 90 days Balchem is expected to generate 1.37 times less return on investment than Flexible Solutions. But when comparing it to its historical volatility, Balchem is 2.21 times less risky than Flexible Solutions. It trades about 0.05 of its potential returns per unit of risk. Flexible Solutions International is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  286.00  in Flexible Solutions International on September 24, 2024 and sell it today you would earn a total of  69.00  from holding Flexible Solutions International or generate 24.13% return on investment over 90 days.

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

Balchem  vs.  Flexible Solutions Internation

Balchem

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Balchem has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Flexible Solutions

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Flexible Solutions International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Flexible Solutions may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Balchem and Flexible Solutions

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

The idea behind Balchem and Flexible Solutions International 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.