Correlation Between Direct Digital and CyberAgent

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

Diversification Opportunities for Direct Digital and CyberAgent

0.52

Correlation Coefficient

Direct Digital  CyberAgent

Very weak diversification

The 3 months correlation between Direct and CyberAgent is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Direct Digital Holdings and CyberAgent ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CyberAgent ADR 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 CyberAgent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CyberAgent ADR has no effect on the direction of Direct Digital i.e., Direct Digital and CyberAgent go up and down completely randomly.

Pair Corralation between Direct Digital and CyberAgent

Given the investment horizon of 90 days Direct Digital Holdings is expected to generate 54.95 times more return on investment than CyberAgent. However, Direct Digital is 54.95 times more volatile than CyberAgent ADR. It trades about 0.09 of its potential returns per unit of risk. CyberAgent ADR is currently generating about -0.06 per unit of risk. If you would invest  272.00  in Direct Digital Holdings on October 24, 2024 and sell it today you would lose (144.00) from holding Direct Digital Holdings or give up 52.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Direct Digital Holdings  vs.  CyberAgent ADR

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.

CyberAgent ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CyberAgent ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Direct Digital and CyberAgent

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

The idea behind Direct Digital Holdings and CyberAgent ADR 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.