Correlation Between CDT Environmental and Block

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

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

Diversification Opportunities for CDT Environmental and Block

-0.61

Correlation Coefficient

CDT Environmental  Block

Excellent diversification

The 3 months correlation between CDT and Block is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding CDT Environmental Technology and Block Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Block Inc and CDT Environmental 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 CDT Environmental Technology 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 CDT Environmental i.e., CDT Environmental and Block go up and down completely randomly.

Pair Corralation between CDT Environmental and Block

Given the investment horizon of 90 days CDT Environmental is expected to generate 11.77 times less return on investment than Block. In addition to that, CDT Environmental is 2.89 times more volatile than Block Inc. It trades about 0.01 of its total potential returns per unit of risk. Block Inc is currently generating about 0.23 per unit of volatility. If you would invest  6,713  in Block Inc on August 30, 2024 and sell it today you would earn a total of  2,165  from holding Block Inc or generate 32.25% return on investment over 90 days.

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

CDT Environmental Technology  vs.  Block Inc

CDT Environmental

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CDT Environmental Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CDT Environmental may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Block Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Block Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Block reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CDT Environmental and Block

The main advantage of trading using opposite CDT Environmental and Block positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CDT Environmental 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 CDT Environmental Technology 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.