Correlation Between PagSeguro Digital and Block

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

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

Diversification Opportunities for PagSeguro Digital and Block

-0.13

Correlation Coefficient

PagSeguro Digital  Block

Good diversification

The 3 months correlation between PagSeguro and Block is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding PagSeguro Digital and Block Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Block Inc and PagSeguro Digital 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 PagSeguro Digital 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 PagSeguro Digital i.e., PagSeguro Digital and Block go up and down completely randomly.

Pair Corralation between PagSeguro Digital and Block

Assuming the 90 days trading horizon PagSeguro Digital is expected to under-perform the Block. But the stock apears to be less risky and, when comparing its historical volatility, PagSeguro Digital is 1.29 times less risky than Block. The stock trades about -0.14 of its potential returns per unit of risk. The Block Inc is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,449  in Block Inc on September 4, 2024 and sell it today you would earn a total of  804.00  from holding Block Inc or generate 55.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

PagSeguro Digital  vs.  Block Inc

PagSeguro Digital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PagSeguro Digital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Block Inc

Risk-Adjusted Performance

17 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Block Inc are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Block sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PagSeguro Digital and Block

The main advantage of trading using opposite PagSeguro Digital and Block positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PagSeguro Digital 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 PagSeguro Digital 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.