Correlation Between Direct Digital and Liberty Latin

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

Diversification Opportunities for Direct Digital and Liberty Latin

-0.32

Correlation Coefficient

Direct Digital  Liberty Latin

Very good diversification

The 3 months correlation between Direct and Liberty is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Direct Digital Holdings and Liberty Latin America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Latin America 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 Liberty Latin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Latin America has no effect on the direction of Direct Digital i.e., Direct Digital and Liberty Latin go up and down completely randomly.

Pair Corralation between Direct Digital and Liberty Latin

Given the investment horizon of 90 days Direct Digital Holdings is expected to under-perform the Liberty Latin. In addition to that, Direct Digital is 4.69 times more volatile than Liberty Latin America. It trades about -0.02 of its total potential returns per unit of risk. Liberty Latin America is currently generating about 0.02 per unit of volatility. If you would invest  623.00  in Liberty Latin America on December 29, 2024 and sell it today you would earn a total of  10.00  from holding Liberty Latin America or generate 1.61% return on investment over 90 days.

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

Direct Digital Holdings  vs.  Liberty Latin America

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.

Liberty Latin America

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Latin America are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Liberty Latin is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Direct Digital and Liberty Latin

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

The idea behind Direct Digital Holdings and Liberty Latin America 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.