Correlation Between DigiAsia Corp and Block

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

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

Diversification Opportunities for DigiAsia Corp and Block

-0.39

Correlation Coefficient

DigiAsia Corp  Block

Very good diversification

The 3 months correlation between DigiAsia and Block is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding DigiAsia Corp and Block Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Block Inc and DigiAsia Corp 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 DigiAsia Corp 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 DigiAsia Corp i.e., DigiAsia Corp and Block go up and down completely randomly.

Pair Corralation between DigiAsia Corp and Block

Given the investment horizon of 90 days DigiAsia Corp is expected to under-perform the Block. In addition to that, DigiAsia Corp is 2.81 times more volatile than Block Inc. It trades about -0.35 of its total potential returns per unit of risk. Block Inc is currently generating about 0.26 per unit of volatility. If you would invest  7,179  in Block Inc on August 16, 2024 and sell it today you would earn a total of  1,403  from holding Block Inc or generate 19.54% return on investment over 90 days.

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

DigiAsia Corp  vs.  Block Inc

DigiAsia Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DigiAsia Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, DigiAsia Corp is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Block Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Block Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Block reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DigiAsia Corp and Block

The main advantage of trading using opposite DigiAsia Corp and Block positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DigiAsia Corp 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 DigiAsia Corp 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.