Correlation Between Balchem and Interface

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

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

Diversification Opportunities for Balchem and Interface

-0.18

Correlation Coefficient

Balchem  Interface

Good diversification

The 3 months correlation between Balchem and Interface is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Balchem and Interface in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interface 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 Interface. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interface has no effect on the direction of Balchem i.e., Balchem and Interface go up and down completely randomly.

Pair Corralation between Balchem and Interface

Given the investment horizon of 90 days Balchem is expected to under-perform the Interface. But the stock apears to be less risky and, when comparing its historical volatility, Balchem is 2.82 times less risky than Interface. The stock trades about -0.03 of its potential returns per unit of risk. The Interface is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,052  in Interface on May 16, 2025 and sell it today you would earn a total of  671.00  from holding Interface or generate 32.7% return on investment over 90 days.

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

Balchem  vs.  Interface

Balchem

Risk-Adjusted Performance

Weakest

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.

Interface

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Interface are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting essential indicators, Interface exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Balchem and Interface

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

The idea behind Balchem and Interface 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.