Correlation Between Ecolab and Balchem Cp

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

Diversification Opportunities for Ecolab and Balchem Cp

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between Ecolab and Balchem is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Balchem Cp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balchem Cp and Ecolab 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 Ecolab Inc are associated (or correlated) with Balchem Cp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balchem Cp has no effect on the direction of Ecolab i.e., Ecolab and Balchem Cp go up and down completely randomly.

Pair Corralation between Ecolab and Balchem Cp

Considering the 90-day investment horizon Ecolab Inc is expected to under-perform the Balchem Cp. In addition to that, Ecolab is 1.09 times more volatile than Balchem Cp. It trades about -0.03 of its total potential returns per unit of risk. Balchem Cp is currently generating about 0.03 per unit of volatility. If you would invest  10,283  in Balchem Cp on July 6, 2022 and sell it today you would earn a total of  2,319  from holding Balchem Cp or generate 22.55% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Ecolab Inc  vs.  Balchem Cp

 Performance (%) 
       Timeline  
Ecolab Inc 
Ecolab Performance
0 of 100
Over the last 90 days Ecolab Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady fundamental indicators, Ecolab is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Ecolab Price Channel

Balchem Cp 
Balchem Performance
0 of 100
Over the last 90 days Balchem Cp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Balchem Cp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Balchem Price Channel

Ecolab and Balchem Cp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ecolab and Balchem Cp

The main advantage of trading using opposite Ecolab and Balchem Cp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecolab position performs unexpectedly, Balchem Cp 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 Cp will offset losses from the drop in Balchem Cp's long position.
Ecolab vs. Amazon Inc
The idea behind Ecolab Inc and Balchem Cp 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.
Balchem Cp vs. Amazon Inc
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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