Correlation Between Balchem and Hudson Technologies

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

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

Diversification Opportunities for Balchem and Hudson Technologies

-0.71

Correlation Coefficient

Balchem  Hudson Technologies

Pay attention - limited upside

The 3 months correlation between Balchem and Hudson is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Balchem and Hudson Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hudson Technologies 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 Hudson Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hudson Technologies has no effect on the direction of Balchem i.e., Balchem and Hudson Technologies go up and down completely randomly.

Pair Corralation between Balchem and Hudson Technologies

Given the investment horizon of 90 days Balchem is expected to generate 0.37 times more return on investment than Hudson Technologies. However, Balchem is 2.73 times less risky than Hudson Technologies. It trades about 0.04 of its potential returns per unit of risk. Hudson Technologies is currently generating about -0.12 per unit of risk. If you would invest  17,241  in Balchem on September 14, 2024 and sell it today you would earn a total of  484.00  from holding Balchem or generate 2.81% return on investment over 90 days.

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

Balchem  vs.  Hudson Technologies

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.

Hudson Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hudson Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Balchem and Hudson Technologies

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

The idea behind Balchem and Hudson Technologies 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.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.