Correlation Between Air Products and Balchem

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

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

Diversification Opportunities for Air Products and Balchem

-0.05

Correlation Coefficient

Air Products  Balchem

Good diversification

The 3 months correlation between Air and Balchem is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Air Products and and Balchem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balchem and Air Products 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 Air Products and 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 Air Products i.e., Air Products and Balchem go up and down completely randomly.

Pair Corralation between Air Products and Balchem

Considering the 90-day investment horizon Air Products and is expected to under-perform the Balchem. In addition to that, Air Products is 1.61 times more volatile than Balchem. It trades about -0.06 of its total potential returns per unit of risk. Balchem is currently generating about 0.02 per unit of volatility. If you would invest  13,943  in Balchem on January 26, 2024 and sell it today you would earn a total of  121.00  from holding Balchem or generate 0.87% return on investment over 90 days.

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

Air Products and  vs.  Balchem

Air Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air Products and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Balchem

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Balchem are ranked lower than 1 (%) 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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Air Products and Balchem

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

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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.