Correlation Between Toast and Block
Can any of the company-specific risk be diversified away by investing in both Toast and Block 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 Toast and Block into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Toast Inc and Block Inc, you can compare the effects of market volatilities on Toast and Block 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 Toast with a short position of Block. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toast and Block.
Diversification Opportunities for Toast and Block
Almost no diversification
The 3 months correlation between Toast and Block is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Toast Inc and Block Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Block Inc and Toast 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 Toast Inc are associated (or correlated) with Block. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Block Inc has no effect on the direction of Toast i.e., Toast and Block go up and down completely randomly.
Pair Corralation between Toast and Block
Given the investment horizon of 90 days Toast Inc is expected to generate 0.92 times more return on investment than Block. However, Toast Inc is 1.08 times less risky than Block. It trades about 0.49 of its potential returns per unit of risk. Block Inc is currently generating about 0.26 per unit of risk. If you would invest 3,012 in Toast Inc on August 28, 2024 and sell it today you would earn a total of 1,288 from holding Toast Inc or generate 42.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Toast Inc vs. Block Inc
Performance |
| Timeline |
| Toast Inc |
| Block Inc |
Toast and Block Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toast and Block
The main advantage of trading using opposite Toast and Block positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toast position performs unexpectedly, Block 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 Block will offset losses from the drop in Block's long position.The idea behind Toast Inc and Block Inc 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.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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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