Correlation Between Balchem and Keurig Dr

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

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

Diversification Opportunities for Balchem and Keurig Dr

-0.39

Correlation Coefficient

Balchem  Keurig Dr

Very good diversification

The 3 months correlation between Balchem and Keurig is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Balchem and Keurig Dr Pepper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keurig Dr Pepper 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 Keurig Dr. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keurig Dr Pepper has no effect on the direction of Balchem i.e., Balchem and Keurig Dr go up and down completely randomly.

Pair Corralation between Balchem and Keurig Dr

Given the investment horizon of 90 days Balchem is expected to under-perform the Keurig Dr. But the stock apears to be less risky and, when comparing its historical volatility, Balchem is 1.04 times less risky than Keurig Dr. The stock trades about -0.01 of its potential returns per unit of risk. The Keurig Dr Pepper is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,101  in Keurig Dr Pepper on February 19, 2024 and sell it today you would earn a total of  274.00  from holding Keurig Dr Pepper or generate 8.84% return on investment over 90 days.

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

Balchem  vs.  Keurig Dr Pepper

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.

Keurig Dr Pepper

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Keurig Dr Pepper are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent fundamental indicators, Keurig Dr may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Balchem and Keurig Dr

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

The idea behind Balchem and Keurig Dr Pepper 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.