Correlation Between HR Block and Carriage Services
Can any of the company-specific risk be diversified away by investing in both HR Block and Carriage Services 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 HR Block and Carriage Services into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HR Block and Carriage Services, you can compare the effects of market volatilities on HR Block and Carriage Services 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 HR Block with a short position of Carriage Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of HR Block and Carriage Services.
Diversification Opportunities for HR Block and Carriage Services
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between HRB and Carriage is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding HR Block and Carriage Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carriage Services and HR 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 HR Block are associated (or correlated) with Carriage Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carriage Services has no effect on the direction of HR Block i.e., HR Block and Carriage Services go up and down completely randomly.
Pair Corralation between HR Block and Carriage Services
Considering the 90-day investment horizon HR Block is expected to generate 0.67 times more return on investment than Carriage Services. However, HR Block is 1.5 times less risky than Carriage Services. It trades about 0.14 of its potential returns per unit of risk. Carriage Services is currently generating about -0.04 per unit of risk. If you would invest 3,238 in HR Block on January 23, 2024 and sell it today you would earn a total of 1,490 from holding HR Block or generate 46.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
HR Block vs. Carriage Services
Performance |
| Timeline |
| HR Block |
| Carriage Services |
HR Block and Carriage Services Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HR Block and Carriage Services
The main advantage of trading using opposite HR Block and Carriage Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HR Block position performs unexpectedly, Carriage Services 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 Carriage Services will offset losses from the drop in Carriage Services' long position.The idea behind HR Block and Carriage Services 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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