Correlation Between Block and Incyte

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

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

Diversification Opportunities for Block and Incyte

-0.38

Correlation Coefficient

Block  Incyte

Very good diversification

The 3 months correlation between Block and Incyte is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Block Inc and Incyte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Incyte 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 Incyte. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Incyte has no effect on the direction of Block i.e., Block and Incyte go up and down completely randomly.

Pair Corralation between Block and Incyte

Allowing for the 90-day total investment horizon Block Inc is expected to under-perform the Incyte. In addition to that, Block is 3.59 times more volatile than Incyte. It trades about -0.2 of its total potential returns per unit of risk. Incyte is currently generating about -0.57 per unit of volatility. If you would invest  5,824  in Incyte on January 20, 2024 and sell it today you would lose (542.00) from holding Incyte or give up 9.31% of portfolio value over 90 days.

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

Block Inc  vs.  Incyte

Block Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Block Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Block may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Incyte

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Incyte has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Block and Incyte

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

The idea behind Block Inc and Incyte 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 CEOs Directory module to screen CEOs from public companies around the world.