Correlation Between Chow Tai and Block

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Can any of the company-specific risk be diversified away by investing in both Chow Tai 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 Chow Tai and Block into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chow Tai Fook and Block Inc, you can compare the effects of market volatilities on Chow Tai 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 Chow Tai with a short position of Block. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chow Tai and Block.

Diversification Opportunities for Chow Tai and Block

0.22
  Correlation Coefficient

Modest diversification

The 3 months correlation between CJEWF and Block is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Chow Tai Fook and Block Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Block Inc and Chow Tai 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 Chow Tai Fook 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 Chow Tai i.e., Chow Tai and Block go up and down completely randomly.

Pair Corralation between Chow Tai and Block

Assuming the 90 days horizon Chow Tai Fook is expected to generate 0.96 times more return on investment than Block. However, Chow Tai Fook is 1.04 times less risky than Block. It trades about 0.05 of its potential returns per unit of risk. Block Inc is currently generating about -0.03 per unit of risk. If you would invest  101.00  in Chow Tai Fook on August 31, 2022 and sell it today you would earn a total of  86.00  from holding Chow Tai Fook or generate 85.15% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Chow Tai Fook  vs.  Block Inc

 Performance (%) 
       Timeline  
Chow Tai Fook 
CJEWF Performance
0 of 100
Over the last 90 days Chow Tai Fook has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Chow Tai is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

CJEWF Price Channel

Block Inc 
Block Performance
0 of 100
Over the last 90 days Block Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Block is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the insiders.

Block Price Channel

Chow Tai and Block Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Chow Tai and Block

The main advantage of trading using opposite Chow Tai and Block positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chow Tai 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.
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The idea behind Chow Tai Fook 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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Check out your portfolio center. 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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