Correlation Between Block and Evertec

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

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

Diversification Opportunities for Block and Evertec

-0.61

Correlation Coefficient

Block  Evertec

Excellent diversification

The 3 months correlation between Block and Evertec is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Block Inc and Evertec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evertec 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 Evertec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evertec has no effect on the direction of Block i.e., Block and Evertec go up and down completely randomly.

Pair Corralation between Block and Evertec

Allowing for the 90-day total investment horizon Block Inc is expected to under-perform the Evertec. In addition to that, Block is 1.8 times more volatile than Evertec. It trades about -0.2 of its total potential returns per unit of risk. Evertec is currently generating about -0.11 per unit of volatility. If you would invest  3,990  in Evertec on January 28, 2024 and sell it today you would lose (147.00) from holding Evertec or give up 3.68% of portfolio value over 90 days.

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

Block Inc  vs.  Evertec

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 abnormal basic indicators, Block may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Evertec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evertec has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Evertec is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Block and Evertec

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

The idea behind Block Inc and Evertec 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..