Correlation Between Block and Applied Materials,

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

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

Diversification Opportunities for Block and Applied Materials,

-0.63

Correlation Coefficient

Block  Applied Materials,

Excellent diversification

The 3 months correlation between Block and Applied is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Block Inc and Applied Materials, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials, 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 Applied Materials,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials, has no effect on the direction of Block i.e., Block and Applied Materials, go up and down completely randomly.

Pair Corralation between Block and Applied Materials,

Assuming the 90 days trading horizon Block Inc is expected to generate 1.76 times more return on investment than Applied Materials,. However, Block is 1.76 times more volatile than Applied Materials,. It trades about 0.2 of its potential returns per unit of risk. Applied Materials, is currently generating about -0.01 per unit of risk. If you would invest  1,669  in Block Inc on October 6, 2024 and sell it today you would earn a total of  633.00  from holding Block Inc or generate 37.93% return on investment over 90 days.

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

Block Inc  vs.  Applied Materials,

Block Inc

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Block Inc are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Block sustained solid returns over the last few months and may actually be approaching a breakup point.

Applied Materials,

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Applied Materials, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Applied Materials, is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Block and Applied Materials,

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

The idea behind Block Inc and Applied Materials, 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.