Correlation Between Block and S1NP34
Can any of the company-specific risk be diversified away by investing in both Block and S1NP34 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 Block and S1NP34 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Block Inc and S1NP34, you can compare the effects of market volatilities on Block and S1NP34 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 Block with a short position of S1NP34. Check out your portfolio center. Please also check ongoing floating volatility patterns of Block and S1NP34.
Diversification Opportunities for Block and S1NP34
Poor diversification
The 3 months correlation between Block and S1NP34 is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Block Inc and S1NP34 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on S1NP34 and Block 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 Block Inc are associated (or correlated) with S1NP34. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of S1NP34 has no effect on the direction of Block i.e., Block and S1NP34 go up and down completely randomly.
Pair Corralation between Block and S1NP34
Assuming the 90 days trading horizon Block Inc is expected to generate 1.6 times more return on investment than S1NP34. However, Block is 1.6 times more volatile than S1NP34. It trades about 0.05 of its potential returns per unit of risk. S1NP34 is currently generating about 0.07 per unit of risk. If you would invest 1,387 in Block Inc on September 26, 2024 and sell it today you would earn a total of 822.00 from holding Block Inc or generate 59.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Block Inc vs. S1NP34
Performance |
| Timeline |
| Block Inc |
| S1NP34 |
Block and S1NP34 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Block and S1NP34
The main advantage of trading using opposite Block and S1NP34 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Block position performs unexpectedly, S1NP34 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 S1NP34 will offset losses from the drop in S1NP34's long position.The idea behind Block Inc and S1NP34 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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