Correlation Between Direct Digital and Hour Loop

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

Diversification Opportunities for Direct Digital and Hour Loop

0.52

Correlation Coefficient

Direct Digital  Hour Loop

Very weak diversification

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

Pair Corralation between Direct Digital and Hour Loop

Given the investment horizon of 90 days Direct Digital Holdings is expected to generate 1.92 times more return on investment than Hour Loop. However, Direct Digital is 1.92 times more volatile than Hour Loop. It trades about -0.02 of its potential returns per unit of risk. Hour Loop is currently generating about -0.06 per unit of risk. If you would invest  222.00  in Direct Digital Holdings on December 28, 2024 and sell it today you would lose (89.00) from holding Direct Digital Holdings or give up 40.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Direct Digital Holdings  vs.  Hour Loop

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.

Hour Loop

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hour Loop has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Direct Digital and Hour Loop

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

The idea behind Direct Digital Holdings and Hour Loop 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.