Correlation Between Digital Brands and Auddia

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

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

Diversification Opportunities for Digital Brands and Auddia

0.03

Correlation Coefficient

Digital Brands  Auddia

Significant diversification

The 3 months correlation between Digital and Auddia is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Digital Brands Group and Auddia Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auddia Inc and Digital Brands 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 Digital Brands Group are associated (or correlated) with Auddia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auddia Inc has no effect on the direction of Digital Brands i.e., Digital Brands and Auddia go up and down completely randomly.

Pair Corralation between Digital Brands and Auddia

Assuming the 90 days horizon Digital Brands is expected to generate 1.3 times less return on investment than Auddia. But when comparing it to its historical volatility, Digital Brands Group is 1.16 times less risky than Auddia. It trades about 0.14 of its potential returns per unit of risk. Auddia Inc is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  0.00  in Auddia Inc on August 30, 2024 and sell it today you would earn a total of  2.76  from holding Auddia Inc or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	74.58%
Values	Daily Returns

Digital Brands Group  vs.  Auddia Inc

Digital Brands Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Digital Brands Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent forward indicators, Digital Brands showed solid returns over the last few months and may actually be approaching a breakup point.

Auddia Inc

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Auddia Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly inconsistent fundamental indicators, Auddia showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Digital Brands and Auddia

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

The idea behind Digital Brands Group and Auddia 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.