Correlation Between Block and ICF International
Can any of the company-specific risk be diversified away by investing in both Block and ICF International 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 ICF International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Block Inc and ICF International, you can compare the effects of market volatilities on Block and ICF International 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 ICF International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Block and ICF International.
Diversification Opportunities for Block and ICF International
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Block and ICF is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Block Inc and ICF International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICF International 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 ICF International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICF International has no effect on the direction of Block i.e., Block and ICF International go up and down completely randomly.
Pair Corralation between Block and ICF International
Allowing for the 90-day total investment horizon Block Inc is expected to generate 1.83 times more return on investment than ICF International. However, Block is 1.83 times more volatile than ICF International. It trades about 0.04 of its potential returns per unit of risk. ICF International is currently generating about 0.04 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 | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Block Inc vs. ICF International
Performance |
| Timeline |
| Block Inc |
| ICF International |
Block and ICF International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Block and ICF International
The main advantage of trading using opposite Block and ICF International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Block position performs unexpectedly, ICF International 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 ICF International will offset losses from the drop in ICF International's long position.The idea behind Block Inc and ICF International 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.| ICF International vs. Forrester Research | ICF International vs. Huron Consulting Group | ICF International vs. Franklin Covey | ICF International vs. FTI Consulting |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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