Correlation Between Block and Challenger
Can any of the company-specific risk be diversified away by investing in both Block and Challenger 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 Challenger into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Block Inc and Challenger, you can compare the effects of market volatilities on Block and Challenger 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 Challenger. Check out your portfolio center. Please also check ongoing floating volatility patterns of Block and Challenger.
Diversification Opportunities for Block and Challenger
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Block and Challenger is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Block Inc and Challenger in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Challenger 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 Challenger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Challenger has no effect on the direction of Block i.e., Block and Challenger go up and down completely randomly.
Pair Corralation between Block and Challenger
Assuming the 90 days trading horizon Block Inc is expected to generate 2.68 times more return on investment than Challenger. However, Block is 2.68 times more volatile than Challenger. It trades about 0.31 of its potential returns per unit of risk. Challenger is currently generating about -0.01 per unit of risk. If you would invest 11,155 in Block Inc on August 28, 2024 and sell it today you would earn a total of 2,714 from holding Block Inc or generate 24.33% 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. Challenger
Performance |
| Timeline |
| Block Inc |
| Challenger |
Block and Challenger Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Block and Challenger
The main advantage of trading using opposite Block and Challenger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Block position performs unexpectedly, Challenger 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 Challenger will offset losses from the drop in Challenger's long position.| Block vs. Readytech Holdings | Block vs. WiseTech Global Limited | Block vs. Ainsworth Game Technology | Block vs. Qbe Insurance 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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