Correlation Between Block and IShares MSCI

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

Diversification Opportunities for Block and IShares MSCI

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between Block and IShares is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Block Inc and IShares MSCI Intl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IShares MSCI Intl 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 IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IShares MSCI Intl has no effect on the direction of Block i.e., Block and IShares MSCI go up and down completely randomly.

Pair Corralation between Block and IShares MSCI

Allowing for the 90-day total investment horizon Block Inc is expected to generate 3.99 times more return on investment than IShares MSCI. However, Block is 3.99 times more volatile than IShares MSCI Intl. It trades about 0.02 of its potential returns per unit of risk. IShares MSCI Intl is currently generating about 0.05 per unit of risk. If you would invest  8,460  in Block Inc on December 29, 2023 and sell it today you would lose (142.00) from holding Block Inc or give up 1.68% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.78%
ValuesDaily Returns

Block Inc  vs.  IShares MSCI Intl

 Performance 
       Timeline  
Block Inc 

Risk-Adjusted Performance

3 of 100

 
Low
 
High
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 April 2024.
IShares MSCI Intl 

Risk-Adjusted Performance

25 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in IShares MSCI Intl are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, IShares MSCI displayed solid returns over the last few months and may actually be approaching a breakup point.

Block and IShares MSCI Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Block and IShares MSCI

The main advantage of trading using opposite Block and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Block position performs unexpectedly, IShares MSCI 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 IShares MSCI will offset losses from the drop in IShares MSCI's long position.
The idea behind Block Inc and IShares MSCI Intl 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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