Correlation Between Direct Digital and LiveOne

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

Diversification Opportunities for Direct Digital and LiveOne

-0.61

Correlation Coefficient

Direct Digital  LiveOne

Excellent diversification

The 3 months correlation between Direct and LiveOne is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Direct Digital Holdings and LiveOne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LiveOne 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 LiveOne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LiveOne has no effect on the direction of Direct Digital i.e., Direct Digital and LiveOne go up and down completely randomly.

Pair Corralation between Direct Digital and LiveOne

Given the investment horizon of 90 days Direct Digital Holdings is expected to generate 24.08 times more return on investment than LiveOne. However, Direct Digital is 24.08 times more volatile than LiveOne. It trades about 0.18 of its potential returns per unit of risk. LiveOne is currently generating about 0.31 per unit of risk. If you would invest  134.00  in Direct Digital Holdings on September 24, 2024 and sell it today you would earn a total of  220.00  from holding Direct Digital Holdings or generate 164.18% return on investment over 90 days.

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

Direct Digital Holdings  vs.  LiveOne

Direct Digital Holdings

Risk-Adjusted Performance

0 of 100

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 unsteady performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

LiveOne

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LiveOne are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, LiveOne displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Direct Digital and LiveOne

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

The idea behind Direct Digital Holdings and LiveOne 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.