Correlation Between Block and WW Grainger

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

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

Diversification Opportunities for Block and WW Grainger

0.79

Correlation Coefficient

Block  WW Grainger

Poor diversification

The 3 months correlation between Block and GWW is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Block Inc and WW Grainger in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WW Grainger 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 WW Grainger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WW Grainger has no effect on the direction of Block i.e., Block and WW Grainger go up and down completely randomly.

Pair Corralation between Block and WW Grainger

Allowing for the 90-day total investment horizon Block Inc is expected to generate 3.74 times more return on investment than WW Grainger. However, Block is 3.74 times more volatile than WW Grainger. It trades about 0.04 of its potential returns per unit of risk. WW Grainger is currently generating about 0.02 per unit of risk. If you would invest  6,884  in Block Inc on February 10, 2024 and sell it today you would earn a total of  436.00  from holding Block Inc or generate 6.33% return on investment over 90 days.

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

Block Inc  vs.  WW Grainger

Block Inc

Risk-Adjusted Performance

3 of 100

Insignificant

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 June 2024.

WW Grainger

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WW Grainger are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, WW Grainger is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Block and WW Grainger

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

The idea behind Block Inc and WW Grainger 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..