Correlation Between ESGL Holdings and Block

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

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

Diversification Opportunities for ESGL Holdings and Block

-0.8

Correlation Coefficient

ESGL Holdings  Block

Pay attention - limited upside

The 3 months correlation between ESGL and Block is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding ESGL Holdings Limited and Block Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Block Inc and ESGL Holdings 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 ESGL Holdings Limited 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 ESGL Holdings i.e., ESGL Holdings and Block go up and down completely randomly.

Pair Corralation between ESGL Holdings and Block

Given the investment horizon of 90 days ESGL Holdings Limited is expected to generate 1.38 times more return on investment than Block. However, ESGL Holdings is 1.38 times more volatile than Block Inc. It trades about -0.07 of its potential returns per unit of risk. Block Inc is currently generating about -0.11 per unit of risk. If you would invest  135.00  in ESGL Holdings Limited on October 10, 2024 and sell it today you would lose (10.00) from holding ESGL Holdings Limited or give up 7.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

ESGL Holdings Limited  vs.  Block Inc

ESGL Holdings Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ESGL Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Etf's technical and fundamental indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the ETF venture institutional investors.

Block Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Block Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Block reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ESGL Holdings and Block

The main advantage of trading using opposite ESGL Holdings and Block positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESGL Holdings 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 ESGL Holdings Limited 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.