Correlation Between Digital Brands and Katapult Holdings

Can any of the company-specific risk be diversified away by investing in both Digital Brands and Katapult Holdings 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 Katapult Holdings 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 Katapult Holdings Equity, you can compare the effects of market volatilities on Digital Brands and Katapult Holdings 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 Katapult Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Brands and Katapult Holdings.

Diversification Opportunities for Digital Brands and Katapult Holdings

0.0

Correlation Coefficient

Digital Brands  Katapult Holdings

Pay attention - limited upside

The 3 months correlation between Digital and Katapult is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Digital Brands Group and Katapult Holdings Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Katapult Holdings Equity 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 Katapult Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Katapult Holdings Equity has no effect on the direction of Digital Brands i.e., Digital Brands and Katapult Holdings go up and down completely randomly.

Pair Corralation between Digital Brands and Katapult Holdings

If you would invest  0.80  in Katapult Holdings Equity on December 30, 2024 and sell it today you would earn a total of  0.14  from holding Katapult Holdings Equity or generate 17.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Digital Brands Group  vs.  Katapult Holdings Equity

Digital Brands Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Digital Brands Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward indicators, Digital Brands is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Katapult Holdings Equity

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Katapult Holdings Equity are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Katapult Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Digital Brands and Katapult Holdings

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

The idea behind Digital Brands Group and Katapult Holdings Equity 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.

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 the Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.