Correlation Between Cimpress and Direct Digital

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

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

Diversification Opportunities for Cimpress and Direct Digital

0.16

Correlation Coefficient

Cimpress  Direct Digital

Average diversification

The 3 months correlation between Cimpress and Direct is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Cimpress NV 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 Cimpress 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 Cimpress NV 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 Cimpress i.e., Cimpress and Direct Digital go up and down completely randomly.

Pair Corralation between Cimpress and Direct Digital

Given the investment horizon of 90 days Cimpress NV is expected to generate 0.44 times more return on investment than Direct Digital. However, Cimpress NV is 2.27 times less risky than Direct Digital. It trades about -0.16 of its potential returns per unit of risk. Direct Digital Holdings is currently generating about -0.79 per unit of risk. If you would invest  9,176  in Cimpress NV on February 2, 2024 and sell it today you would lose (746.00) from holding Cimpress NV or give up 8.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Cimpress NV  vs.  Direct Digital Holdings

Cimpress NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cimpress NV has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Cimpress is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Direct Digital Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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 unsteady performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Cimpress and Direct Digital

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

The idea behind Cimpress NV and Direct Digital Holdings 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.