Correlation Between Block and Orsted AS

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

By analyzing existing cross correlation between Block Inc and Orsted AS ADR, you can compare the effects of market volatilities on Block and Orsted AS 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 Orsted AS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Block and Orsted AS.

Diversification Opportunities for Block and Orsted AS

-0.53

Correlation Coefficient

Block  Orsted AS

Excellent diversification

The 3 months correlation between Block and Orsted is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Block Inc and Orsted AS ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orsted AS ADR 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 Orsted AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orsted AS ADR has no effect on the direction of Block i.e., Block and Orsted AS go up and down completely randomly.

Pair Corralation between Block and Orsted AS

Allowing for the 90-day total investment horizon Block Inc is expected to under-perform the Orsted AS. In addition to that, Block is 1.25 times more volatile than Orsted AS ADR. It trades about -0.16 of its total potential returns per unit of risk. Orsted AS ADR is currently generating about -0.01 per unit of volatility. If you would invest  1,823  in Orsted AS ADR on January 25, 2024 and sell it today you would lose (15.00) from holding Orsted AS ADR or give up 0.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Block Inc  vs.  Orsted AS ADR

Block Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Block Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Block reported solid returns over the last few months and may actually be approaching a breakup point.

Orsted AS ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orsted AS ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Orsted AS is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Block and Orsted AS

The main advantage of trading using opposite Block and Orsted AS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Block position performs unexpectedly, Orsted AS 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 Orsted AS will offset losses from the drop in Orsted AS's long position.

The idea behind Block Inc and Orsted AS ADR 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.