Correlation Between Workiva and Block
Can any of the company-specific risk be diversified away by investing in both Workiva and Block 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 Workiva and Block into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Workiva and Block Inc, you can compare the effects of market volatilities on Workiva and Block 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 Workiva with a short position of Block. Check out your portfolio center. Please also check ongoing floating volatility patterns of Workiva and Block.
Diversification Opportunities for Workiva and Block
Excellent diversification
The 3 months correlation between Workiva and Block is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Workiva and Block Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Block Inc and Workiva 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 Workiva are associated (or correlated) with Block. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Block Inc has no effect on the direction of Workiva i.e., Workiva and Block go up and down completely randomly.
Pair Corralation between Workiva and Block
Allowing for the 90-day total investment horizon Workiva is expected to generate 0.72 times more return on investment than Block. However, Workiva is 1.4 times less risky than Block. It trades about -0.05 of its potential returns per unit of risk. Block Inc is currently generating about -0.14 per unit of risk. If you would invest 8,233 in Workiva on January 25, 2024 and sell it today you would lose (204.00) from holding Workiva or give up 2.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Workiva vs. Block Inc
Performance |
| Timeline |
| Workiva |
| Block Inc |
Workiva and Block Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Workiva and Block
The main advantage of trading using opposite Workiva and Block positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Workiva position performs unexpectedly, Block 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 Block will offset losses from the drop in Block's long position.The idea behind Workiva and Block Inc 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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