Correlation Between Block and Champion Iron
Can any of the company-specific risk be diversified away by investing in both Block and Champion Iron 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 Champion Iron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Block Inc and Champion Iron, you can compare the effects of market volatilities on Block and Champion Iron 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 Champion Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Block and Champion Iron.
Diversification Opportunities for Block and Champion Iron
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Block and Champion is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Block Inc and Champion Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champion Iron 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 Champion Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Champion Iron has no effect on the direction of Block i.e., Block and Champion Iron go up and down completely randomly.
Pair Corralation between Block and Champion Iron
Assuming the 90 days trading horizon Block Inc is expected to generate 1.31 times more return on investment than Champion Iron. However, Block is 1.31 times more volatile than Champion Iron. It trades about 0.03 of its potential returns per unit of risk. Champion Iron is currently generating about 0.0 per unit of risk. If you would invest 11,670 in Block Inc on October 20, 2024 and sell it today you would earn a total of 2,255 from holding Block Inc or generate 19.32% 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. Champion Iron
Performance |
| Timeline |
| Block Inc |
| Champion Iron |
Block and Champion Iron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Block and Champion Iron
The main advantage of trading using opposite Block and Champion Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Block position performs unexpectedly, Champion Iron 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 Champion Iron will offset losses from the drop in Champion Iron's long position.The idea behind Block Inc and Champion Iron 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.| Champion Iron vs. Energy Technologies Limited | Champion Iron vs. 29Metals | Champion Iron vs. Cleanaway Waste Management | Champion Iron vs. Ras Technology Holdings |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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