Correlation Between Block and Katapult Holdings
Can any of the company-specific risk be diversified away by investing in both Block and Katapult Holdings 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 Katapult Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Block Inc and Katapult Holdings, you can compare the effects of market volatilities on Block and Katapult Holdings 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 Katapult Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Block and Katapult Holdings.
Diversification Opportunities for Block and Katapult Holdings
-0.83 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Block and Katapult is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Block Inc and Katapult Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Katapult Holdings 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 Katapult Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Katapult Holdings has no effect on the direction of Block i.e., Block and Katapult Holdings go up and down completely randomly.
Pair Corralation between Block and Katapult Holdings
Allowing for the 90-day total investment horizon Block Inc is expected to generate 0.62 times more return on investment than Katapult Holdings. However, Block Inc is 1.62 times less risky than Katapult Holdings. It trades about 0.21 of its potential returns per unit of risk. Katapult Holdings is currently generating about -0.19 per unit of risk. If you would invest 6,468 in Block Inc on August 28, 2024 and sell it today you would earn a total of 2,607 from holding Block Inc or generate 40.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Block Inc vs. Katapult Holdings
Performance |
| Timeline |
| Block Inc |
| Katapult Holdings |
Block and Katapult Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Block and Katapult Holdings
The main advantage of trading using opposite Block and Katapult Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Block position performs unexpectedly, Katapult Holdings 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 Katapult Holdings will offset losses from the drop in Katapult Holdings' long position.The idea behind Block Inc and Katapult Holdings 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.| Katapult Holdings vs. GigaCloud Technology Class | Katapult Holdings vs. Arqit Quantum | Katapult Holdings vs. Telos Corp | Katapult Holdings vs. Cemtrex |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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