Correlation Between Alight and Block
Can any of the company-specific risk be diversified away by investing in both Alight and Block 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 Alight and Block into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alight Inc and Block Inc, you can compare the effects of market volatilities on Alight and Block 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 Alight with a short position of Block. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alight and Block.
Diversification Opportunities for Alight and Block
Poor diversification
The 3 months correlation between Alight and Block is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Alight Inc and Block Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Block Inc and Alight 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 Alight Inc are associated (or correlated) with Block. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Block Inc has no effect on the direction of Alight i.e., Alight and Block go up and down completely randomly.
Pair Corralation between Alight and Block
Given the investment horizon of 90 days Alight is expected to generate 1.66 times less return on investment than Block. But when comparing it to its historical volatility, Alight Inc is 1.0 times less risky than Block. It trades about 0.15 of its potential returns per unit of risk. Block Inc is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 7,322 in Block Inc on August 30, 2024 and sell it today you would earn a total of 1,556 from holding Block Inc or generate 21.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Alight Inc vs. Block Inc
Performance |
| Timeline |
| Alight Inc |
| Block Inc |
Alight and Block Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alight and Block
The main advantage of trading using opposite Alight and Block positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alight position performs unexpectedly, Block 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 Block will offset losses from the drop in Block's long position.The idea behind Alight Inc and Block Inc 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
Other Complementary Tools
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account |