Correlation Between Australia and Block

Can any of the company-specific risk be diversified away by investing in both Australia 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 Australia and Block into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Australia and New and Block Inc, you can compare the effects of market volatilities on Australia 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 Australia with a short position of Block. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australia and Block.

Diversification Opportunities for Australia and Block

0.02

Correlation Coefficient

Australia  Block

Significant diversification

The 3 months correlation between Australia and Block is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Australia and New and Block Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Block Inc and Australia 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 Australia and New 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 Australia i.e., Australia and Block go up and down completely randomly.

Pair Corralation between Australia and Block

Assuming the 90 days trading horizon Australia is expected to generate 1.8 times less return on investment than Block. But when comparing it to its historical volatility, Australia and New is 3.1 times less risky than Block. It trades about 0.06 of its potential returns per unit of risk. Block Inc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  10,448  in Block Inc on October 6, 2024 and sell it today you would earn a total of  3,552  from holding Block Inc or generate 34.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Australia and New  vs.  Block Inc

Australia and New

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Australia and New has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Australia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Block Inc

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Block Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Block unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Australia and Block

The main advantage of trading using opposite Australia and Block positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australia 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 Australia and New 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.

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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.