Can any of the company-specific risk be diversified away by investing in both Glory Star 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 Glory Star and Direct Digital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Glory Star New and Direct Digital Holdings, you can compare the effects of market volatilities on Glory Star 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 Glory Star with a short position of Direct Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Glory Star and Direct Digital.
Diversification Opportunities for Glory Star and Direct Digital
The 3 months correlation between Glory and Direct is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Glory Star New 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 Glory Star 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 Glory Star New 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 Glory Star i.e., Glory Star and Direct Digital go up and down completely randomly.
Pair Corralation between Glory Star and Direct Digital
Assuming the 90 days horizon Glory Star New is expected to generate 3.73 times more return on investment than Direct Digital. However, Glory Star is 3.73 times more volatile than Direct Digital Holdings. It trades about 0.1 of its potential returns per unit of risk. Direct Digital Holdings is currently generating about 0.05 per unit of risk. If you would invest 0.93 in Glory Star New on March 6, 2024 and sell it today you would lose (0.44) from holding Glory Star New or give up 47.31% of portfolio value over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Glory Star New are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Glory Star showed solid returns over the last few months and may actually be approaching a breakup point.
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.