Correlation Between Direct Digital and Telecom Argentina

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

Diversification Opportunities for Direct Digital and Telecom Argentina

0.38

Correlation Coefficient

Direct Digital  Telecom Argentina

Weak diversification

The 3 months correlation between Direct and Telecom is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Direct Digital Holdings and Telecom Argentina SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telecom Argentina 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 Telecom Argentina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telecom Argentina has no effect on the direction of Direct Digital i.e., Direct Digital and Telecom Argentina go up and down completely randomly.

Pair Corralation between Direct Digital and Telecom Argentina

Given the investment horizon of 90 days Direct Digital Holdings is expected to under-perform the Telecom Argentina. In addition to that, Direct Digital is 3.21 times more volatile than Telecom Argentina SA. It trades about -0.02 of its total potential returns per unit of risk. Telecom Argentina SA is currently generating about -0.06 per unit of volatility. If you would invest  1,271  in Telecom Argentina SA on December 28, 2024 and sell it today you would lose (212.00) from holding Telecom Argentina SA or give up 16.68% of portfolio value over 90 days.

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

Direct Digital Holdings  vs.  Telecom Argentina SA

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.

Telecom Argentina

Risk-Adjusted Performance

Very Weak

Over the last 90 days Telecom Argentina SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Direct Digital and Telecom Argentina

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

The idea behind Direct Digital Holdings and Telecom Argentina SA 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.