Can any of the company-specific risk be diversified away by investing in both Baosheng Media and Direct Digital 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 Baosheng Media and Direct Digital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baosheng Media Group and Direct Digital Holdings, you can compare the effects of market volatilities on Baosheng Media and Direct Digital 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 Baosheng Media with a short position of Direct Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baosheng Media and Direct Digital.
Diversification Opportunities for Baosheng Media and Direct Digital
The 3 months correlation between Baosheng and Direct is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Baosheng Media Group and Direct Digital Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direct Digital Holdings and Baosheng Media 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 Baosheng Media Group are associated (or correlated) with Direct Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direct Digital Holdings has no effect on the direction of Baosheng Media i.e., Baosheng Media and Direct Digital go up and down completely randomly.
Pair Corralation between Baosheng Media and Direct Digital
Given the investment horizon of 90 days Baosheng Media Group is expected to generate 0.7 times more return on investment than Direct Digital. However, Baosheng Media Group is 1.42 times less risky than Direct Digital. It trades about -0.17 of its potential returns per unit of risk. Direct Digital Holdings is currently generating about -0.49 per unit of risk. If you would invest 320.00 in Baosheng Media Group on March 6, 2024 and sell it today you would lose (47.00) from holding Baosheng Media Group or give up 14.69% of portfolio value over 90 days.
Over the last 90 days Baosheng Media Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in July 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
Over the last 90 days Direct Digital Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in July 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.