Correlation Between Balchem and NewMarket

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Can any of the company-specific risk be diversified away by investing in both Balchem and NewMarket 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 NewMarket into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Balchem and NewMarket, you can compare the effects of market volatilities on Balchem and NewMarket 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 NewMarket. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balchem and NewMarket.

Diversification Opportunities for Balchem and NewMarket

BalchemNewMarketDiversified AwayBalchemNewMarketDiversified Away100%
0.54
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Balchem and NewMarket is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Balchem and NewMarket in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewMarket 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 NewMarket. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewMarket has no effect on the direction of Balchem i.e., Balchem and NewMarket go up and down completely randomly.

Pair Corralation between Balchem and NewMarket

Given the investment horizon of 90 days Balchem is expected to generate 1.03 times more return on investment than NewMarket. However, Balchem is 1.03 times more volatile than NewMarket. It trades about 0.03 of its potential returns per unit of risk. NewMarket is currently generating about -0.04 per unit of risk. If you would invest  17,241  in Balchem on September 15, 2024 and sell it today you would earn a total of  332.00  from holding Balchem or generate 1.93% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Balchem  vs.  NewMarket

 Performance 
JavaScript chart by amCharts 3.21.15OctNov -50510
JavaScript chart by amCharts 3.21.15BCPC NEU
       Timeline  
Balchem 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Balchem are ranked lower than 2 (%) 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.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec165170175180185
NewMarket 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days NewMarket has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, NewMarket is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec520530540550560

Balchem and NewMarket Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.2-3.14-2.09-1.04-0.01761.052.133.224.35.39 0.050.100.150.20
JavaScript chart by amCharts 3.21.15BCPC NEU
       Returns  

Pair Trading with Balchem and NewMarket

The main advantage of trading using opposite Balchem and NewMarket positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balchem position performs unexpectedly, NewMarket 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 NewMarket will offset losses from the drop in NewMarket's long position.
The idea behind Balchem and NewMarket 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.

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