Correlation Between Block and Blackline

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Can any of the company-specific risk be diversified away by investing in both Block and Blackline 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 Blackline into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Block Inc and Blackline, you can compare the effects of market volatilities on Block and Blackline 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 Blackline. Check out your portfolio center. Please also check ongoing floating volatility patterns of Block and Blackline.

Diversification Opportunities for Block and Blackline

0.63
  Correlation Coefficient

Poor diversification

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

Pair Corralation between Block and Blackline

Allowing for the 90-day total investment horizon Block Inc is expected to generate 1.22 times more return on investment than Blackline. However, Block is 1.22 times more volatile than Blackline. It trades about 0.05 of its potential returns per unit of risk. Blackline is currently generating about 0.03 per unit of risk. If you would invest  5,414  in Block Inc on December 19, 2023 and sell it today you would earn a total of  2,672  from holding Block Inc or generate 49.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Block Inc  vs.  Blackline

 Performance 
       Timeline  
Block Inc 

Risk-Adjusted Performance

2 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Block Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Block may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Blackline 

Risk-Adjusted Performance

1 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Blackline are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Blackline is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Block and Blackline Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Block and Blackline

The main advantage of trading using opposite Block and Blackline positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Block position performs unexpectedly, Blackline 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 Blackline will offset losses from the drop in Blackline's long position.
The idea behind Block Inc and Blackline 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.

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