Correlation Between Direct Digital and Glory Star

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

Diversification Opportunities for Direct Digital and Glory Star

0.45

Correlation Coefficient

Direct Digital  Glory Star

Very weak diversification

The 3 months correlation between Direct and Glory is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Direct Digital Holdings and Glory Star New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glory Star New 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 Glory Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glory Star New has no effect on the direction of Direct Digital i.e., Direct Digital and Glory Star go up and down completely randomly.

Pair Corralation between Direct Digital and Glory Star

Given the investment horizon of 90 days Direct Digital Holdings is expected to under-perform the Glory Star. But the stock apears to be less risky and, when comparing its historical volatility, Direct Digital Holdings is 5.39 times less risky than Glory Star. The stock trades about -0.08 of its potential returns per unit of risk. The Glory Star New is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  0.10  in Glory Star New on December 28, 2024 and sell it today you would lose (0.01) from holding Glory Star New or give up 10.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	49.18%
Values	Daily Returns

Direct Digital Holdings  vs.  Glory Star New

Direct Digital Holdings

Risk-Adjusted Performance

Very Weak

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 April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Glory Star New

Risk-Adjusted Performance

Good

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

Pair Trading with Direct Digital and Glory Star

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

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