Correlation Between Light Wonder and Block
Can any of the company-specific risk be diversified away by investing in both Light Wonder 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 Light Wonder and Block into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Light Wonder and Block Inc, you can compare the effects of market volatilities on Light Wonder 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 Light Wonder with a short position of Block. Check out your portfolio center. Please also check ongoing floating volatility patterns of Light Wonder and Block.
Diversification Opportunities for Light Wonder and Block
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Light and Block is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Light Wonder and Block Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Block Inc and Light Wonder 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 Light Wonder 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 Light Wonder i.e., Light Wonder and Block go up and down completely randomly.
Pair Corralation between Light Wonder and Block
Assuming the 90 days trading horizon Light Wonder is expected to generate 0.67 times more return on investment than Block. However, Light Wonder is 1.5 times less risky than Block. It trades about 0.06 of its potential returns per unit of risk. Block Inc is currently generating about 0.03 per unit of risk. If you would invest 9,100 in Light Wonder on October 18, 2024 and sell it today you would earn a total of 4,924 from holding Light Wonder or generate 54.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 83.4% |
| Values | Daily Returns |
Light Wonder vs. Block Inc
Performance |
| Timeline |
| Light Wonder |
| Block Inc |
Light Wonder and Block Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Light Wonder and Block
The main advantage of trading using opposite Light Wonder and Block positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Light Wonder 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.| Light Wonder vs. Lottery | Light Wonder vs. Pointsbet Holdings | Light Wonder vs. Bluebet Holdings | Light Wonder vs. Betmakers Technology Group |
| Block vs. Australian Unity Office | Block vs. Liberty Financial Group | Block vs. Homeco Daily Needs | Block vs. Latitude Financial Services |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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