Correlation Between DraftKings and HR Block

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

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

Diversification Opportunities for DraftKings and HR Block

-0.48

Correlation Coefficient

DraftKings  HR Block

Very good diversification

The 3 months correlation between DraftKings and HRB is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding DraftKings and HR Block in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HR Block and DraftKings 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 DraftKings are associated (or correlated) with HR Block. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HR Block has no effect on the direction of DraftKings i.e., DraftKings and HR Block go up and down completely randomly.

Pair Corralation between DraftKings and HR Block

Given the investment horizon of 90 days DraftKings is expected to generate 1.44 times more return on investment than HR Block. However, DraftKings is 1.44 times more volatile than HR Block. It trades about 0.17 of its potential returns per unit of risk. HR Block is currently generating about -0.06 per unit of risk. If you would invest  3,428  in DraftKings on September 4, 2024 and sell it today you would earn a total of  965.00  from holding DraftKings or generate 28.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

DraftKings  vs.  HR Block

DraftKings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DraftKings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, DraftKings reported solid returns over the last few months and may actually be approaching a breakup point.

HR Block

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HR Block has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with DraftKings and HR Block

The main advantage of trading using opposite DraftKings and HR Block positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DraftKings position performs unexpectedly, HR 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 HR Block will offset losses from the drop in HR Block's long position.

The idea behind DraftKings and HR Block 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.