Correlation Between Block and SOS

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

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

Diversification Opportunities for Block and SOS

-0.62

Correlation Coefficient

Block  SOS

Excellent diversification

The 3 months correlation between Block and SOS is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Block Inc and SOS Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOS Limited 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 SOS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOS Limited has no effect on the direction of Block i.e., Block and SOS go up and down completely randomly.

Pair Corralation between Block and SOS

Allowing for the 90-day total investment horizon Block Inc is expected to generate 0.23 times more return on investment than SOS. However, Block Inc is 4.27 times less risky than SOS. It trades about -0.05 of its potential returns per unit of risk. SOS Limited is currently generating about -0.04 per unit of risk. If you would invest  9,242  in Block Inc on September 20, 2024 and sell it today you would lose (380.00) from holding Block Inc or give up 4.11% of portfolio value over 90 days.

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

Block Inc  vs.  SOS Limited

Block Inc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Block Inc are ranked lower than 15 (%) 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.

SOS Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SOS Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Block and SOS

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

The idea behind Block Inc and SOS Limited 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.