Correlation Between Block and Seek
Can any of the company-specific risk be diversified away by investing in both Block and Seek 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 Seek into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Block Inc and Seek, you can compare the effects of market volatilities on Block and Seek 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 Seek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Block and Seek.
Diversification Opportunities for Block and Seek
Poor diversification
The 3 months correlation between Block and Seek is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Block Inc and Seek in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seek 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 Seek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seek has no effect on the direction of Block i.e., Block and Seek go up and down completely randomly.
Pair Corralation between Block and Seek
Assuming the 90 days trading horizon Block Inc is expected to generate 2.52 times more return on investment than Seek. However, Block is 2.52 times more volatile than Seek. It trades about 0.29 of its potential returns per unit of risk. Seek is currently generating about 0.18 per unit of risk. If you would invest 11,168 in Block Inc on September 1, 2024 and sell it today you would earn a total of 2,663 from holding Block Inc or generate 23.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Block Inc vs. Seek
Performance |
| Timeline |
| Block Inc |
| Seek |
Block and Seek Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Block and Seek
The main advantage of trading using opposite Block and Seek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Block position performs unexpectedly, Seek 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 Seek will offset losses from the drop in Seek's long position.| Block vs. Aneka Tambang Tbk | Block vs. Unibail Rodamco Westfield SE | Block vs. Macquarie Group | Block vs. Commonwealth Bank |
| Seek vs. Vulcan Steel | Seek vs. The Environmental Group | Seek vs. Autosports Group | Seek vs. Centaurus Metals |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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