Correlation Between Block and Aqua Metals

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

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

Diversification Opportunities for Block and Aqua Metals

-0.8

Correlation Coefficient

Block  Aqua Metals

Pay attention - limited upside

The 3 months correlation between Block and Aqua is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Block Inc and Aqua Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqua Metals 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 Aqua Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqua Metals has no effect on the direction of Block i.e., Block and Aqua Metals go up and down completely randomly.

Pair Corralation between Block and Aqua Metals

Allowing for the 90-day total investment horizon Block is expected to generate 11.93 times less return on investment than Aqua Metals. But when comparing it to its historical volatility, Block Inc is 3.06 times less risky than Aqua Metals. It trades about 0.02 of its potential returns per unit of risk. Aqua Metals is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  239.00  in Aqua Metals on September 30, 2024 and sell it today you would earn a total of  23.00  from holding Aqua Metals or generate 9.62% return on investment over 90 days.

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

Block Inc  vs.  Aqua Metals

Block Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Block Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Block reported solid returns over the last few months and may actually be approaching a breakup point.

Aqua Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aqua Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Block and Aqua Metals

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

The idea behind Block Inc and Aqua Metals 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.