Correlation Between Clover Health and Block

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

By analyzing existing cross correlation between Clover Health Investments and Block Inc, you can compare the effects of market volatilities on Clover Health 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 Clover Health with a short position of Block. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clover Health and Block.

Diversification Opportunities for Clover Health and Block

-0.63

Correlation Coefficient

Clover Health  Block

Excellent diversification

The 3 months correlation between Clover and Block is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Clover Health Investments and Block Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Block Inc and Clover Health 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 Clover Health Investments 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 Clover Health i.e., Clover Health and Block go up and down completely randomly.

Pair Corralation between Clover Health and Block

Given the investment horizon of 90 days Clover Health Investments is expected to under-perform the Block. In addition to that, Clover Health is 1.28 times more volatile than Block Inc. It trades about -0.01 of its total potential returns per unit of risk. Block Inc is currently generating about 0.02 per unit of volatility. If you would invest  6,146  in Block Inc on March 21, 2024 and sell it today you would earn a total of  44.00  from holding Block Inc or generate 0.72% return on investment over 90 days.

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

Clover Health Investments  vs.  Block Inc

Clover Health Investments

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Clover Health Investments are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Clover Health showed solid returns over the last few months and may actually be approaching a breakup point.

Block Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Block Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with abnormal performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in July 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Clover Health and Block

The main advantage of trading using opposite Clover Health and Block positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clover Health 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 Clover Health Investments 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.

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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.