Correlation Between Block and FTI Consulting
Can any of the company-specific risk be diversified away by investing in both Block and FTI Consulting 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 FTI Consulting into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Block Inc and FTI Consulting, you can compare the effects of market volatilities on Block and FTI Consulting 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 FTI Consulting. Check out your portfolio center. Please also check ongoing floating volatility patterns of Block and FTI Consulting.
Diversification Opportunities for Block and FTI Consulting
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Block and FTI is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Block Inc and FTI Consulting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FTI Consulting 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 FTI Consulting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FTI Consulting has no effect on the direction of Block i.e., Block and FTI Consulting go up and down completely randomly.
Pair Corralation between Block and FTI Consulting
Allowing for the 90-day total investment horizon Block Inc is expected to generate 1.62 times more return on investment than FTI Consulting. However, Block is 1.62 times more volatile than FTI Consulting. It trades about 0.04 of its potential returns per unit of risk. FTI Consulting is currently generating about 0.03 per unit of risk. If you would invest 6,107 in Block Inc on August 28, 2024 and sell it today you would earn a total of 2,968 from holding Block Inc or generate 48.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Block Inc vs. FTI Consulting
Performance |
| Timeline |
| Block Inc |
| FTI Consulting |
Block and FTI Consulting Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Block and FTI Consulting
The main advantage of trading using opposite Block and FTI Consulting positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Block position performs unexpectedly, FTI Consulting 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 FTI Consulting will offset losses from the drop in FTI Consulting's long position.The idea behind Block Inc and FTI Consulting 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.| FTI Consulting vs. Franklin Covey | FTI Consulting vs. TransUnion | FTI Consulting vs. ICF International | FTI Consulting vs. Huron Consulting Group |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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