Correlation Between NewMarket and Balchem

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

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

Diversification Opportunities for NewMarket and Balchem

0.46

Correlation Coefficient

NewMarket  Balchem

Very weak diversification

The 3 months correlation between NewMarket and Balchem is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding NewMarket and Balchem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balchem and NewMarket 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 NewMarket 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 NewMarket i.e., NewMarket and Balchem go up and down completely randomly.

Pair Corralation between NewMarket and Balchem

Considering the 90-day investment horizon NewMarket is expected to under-perform the Balchem. But the stock apears to be less risky and, when comparing its historical volatility, NewMarket is 1.03 times less risky than Balchem. The stock trades about -0.04 of its potential returns per unit of risk. The Balchem is currently generating about 0.04 of returns per unit of risk over similar time horizon. 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 Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

NewMarket  vs.  Balchem

NewMarket

Risk-Adjusted Performance

0 of 100

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.

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.

Pair Trading with NewMarket and Balchem

The main advantage of trading using opposite NewMarket and Balchem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NewMarket 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.

The idea behind NewMarket and Balchem 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.