Correlation Between Direct Digital and Townsquare Media

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

Diversification Opportunities for Direct Digital and Townsquare Media

0.4

Correlation Coefficient

Direct Digital  Townsquare Media

Very weak diversification

The 3 months correlation between Direct and Townsquare is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Direct Digital Holdings and Townsquare Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Townsquare Media 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 Townsquare Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Townsquare Media has no effect on the direction of Direct Digital i.e., Direct Digital and Townsquare Media go up and down completely randomly.

Pair Corralation between Direct Digital and Townsquare Media

Given the investment horizon of 90 days Direct Digital Holdings is expected to under-perform the Townsquare Media. In addition to that, Direct Digital is 3.61 times more volatile than Townsquare Media. It trades about -0.21 of its total potential returns per unit of risk. Townsquare Media is currently generating about -0.06 per unit of volatility. If you would invest  919.00  in Townsquare Media on December 27, 2024 and sell it today you would lose (83.00) from holding Townsquare Media or give up 9.03% 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.  Townsquare Media

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.

Townsquare Media

Risk-Adjusted Performance

Very Weak

Over the last 90 days Townsquare Media has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Direct Digital and Townsquare Media

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

The idea behind Direct Digital Holdings and Townsquare Media 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.