Correlation Between Direct Digital and Able View

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

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

Diversification Opportunities for Direct Digital and Able View

0.44

Correlation Coefficient

Direct Digital  Able View

Very weak diversification

The 3 months correlation between Direct and Able is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Direct Digital Holdings and Able View Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Able View Global and Direct Digital 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 Direct Digital Holdings are associated (or correlated) with Able View. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Able View Global has no effect on the direction of Direct Digital i.e., Direct Digital and Able View go up and down completely randomly.

Pair Corralation between Direct Digital and Able View

Given the investment horizon of 90 days Direct Digital Holdings is expected to generate 10.53 times more return on investment than Able View. However, Direct Digital is 10.53 times more volatile than Able View Global. It trades about 0.18 of its potential returns per unit of risk. Able View Global is currently generating about 0.29 per unit of risk. If you would invest  101.00  in Direct Digital Holdings on October 9, 2024 and sell it today you would earn a total of  54.00  from holding Direct Digital Holdings or generate 53.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	50.0%
Values	Daily Returns

Direct Digital Holdings  vs.  Able View Global

Direct Digital Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Direct Digital Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Direct Digital unveiled solid returns over the last few months and may actually be approaching a breakup point.

Able View Global

Risk-Adjusted Performance

0 of 100

Good

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

Pair Trading with Direct Digital and Able View

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

The idea behind Direct Digital Holdings and Able View Global 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.