Correlation Between Block and Visa

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

Diversification Opportunities for Block and Visa

0.21
  Correlation Coefficient

Modest diversification

The 3 months correlation between Block and Visa is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Block Inc and Visa Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Class A 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 Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Class A has no effect on the direction of Block i.e., Block and Visa go up and down completely randomly.

Pair Corralation between Block and Visa

Allowing for the 90-day total investment horizon Block Inc is expected to generate 4.4 times more return on investment than Visa. However, Block is 4.4 times more volatile than Visa Class A. It trades about 0.14 of its potential returns per unit of risk. Visa Class A is currently generating about 0.14 per unit of risk. If you would invest  6,585  in Block Inc on December 20, 2023 and sell it today you would earn a total of  1,501  from holding Block Inc or generate 22.79% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Block Inc  vs.  Visa Class A

 Performance 
       Timeline  
Block Inc 

Risk-Adjusted Performance

3 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Block Inc are ranked lower than 3 (%) 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.
Visa Class A 

Risk-Adjusted Performance

17 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Block and Visa Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Block and Visa

The main advantage of trading using opposite Block and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Block position performs unexpectedly, Visa 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 Visa will offset losses from the drop in Visa's long position.
The idea behind Block Inc and Visa Class A 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.

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