Correlation Between Block and Exponent

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

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

Diversification Opportunities for Block and Exponent

-0.72

Correlation Coefficient

Block  Exponent

Pay attention - limited upside

The 3 months correlation between Block and Exponent is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Block Inc and Exponent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exponent 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 Exponent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exponent has no effect on the direction of Block i.e., Block and Exponent go up and down completely randomly.

Pair Corralation between Block and Exponent

Allowing for the 90-day total investment horizon Block Inc is expected to generate 1.48 times more return on investment than Exponent. However, Block is 1.48 times more volatile than Exponent. It trades about 0.25 of its potential returns per unit of risk. Exponent is currently generating about -0.08 per unit of risk. If you would invest  6,399  in Block Inc on September 13, 2024 and sell it today you would earn a total of  3,420  from holding Block Inc or generate 53.45% 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.  Exponent

Block Inc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Block Inc are ranked lower than 19 (%) 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.

Exponent

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Exponent has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Block and Exponent

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

The idea behind Block Inc and Exponent 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.