Correlation Between Fundamental Global and Direct Digital

Can any of the company-specific risk be diversified away by investing in both Fundamental Global and Direct Digital 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 Fundamental Global and Direct Digital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fundamental Global and Direct Digital Holdings, you can compare the effects of market volatilities on Fundamental Global and Direct Digital 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 Fundamental Global with a short position of Direct Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fundamental Global and Direct Digital.

Diversification Opportunities for Fundamental Global and Direct Digital

0.25

Correlation Coefficient

Fundamental Global  Direct Digital

Modest diversification

The 3 months correlation between Fundamental and Direct is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Fundamental Global and Direct Digital Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direct Digital Holdings and Fundamental Global 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 Fundamental Global are associated (or correlated) with Direct Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direct Digital Holdings has no effect on the direction of Fundamental Global i.e., Fundamental Global and Direct Digital go up and down completely randomly.

Pair Corralation between Fundamental Global and Direct Digital

Considering the 90-day investment horizon Fundamental Global is expected to generate 0.4 times more return on investment than Direct Digital. However, Fundamental Global is 2.48 times less risky than Direct Digital. It trades about 0.01 of its potential returns per unit of risk. Direct Digital Holdings is currently generating about -0.07 per unit of risk. If you would invest  1,956  in Fundamental Global on December 30, 2024 and sell it today you would lose (113.00) from holding Fundamental Global or give up 5.78% of portfolio value over 90 days.

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

Fundamental Global  vs.  Direct Digital Holdings

Fundamental Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fundamental Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Fundamental Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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.

Pair Trading with Fundamental Global and Direct Digital

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

The idea behind Fundamental Global and Direct Digital Holdings 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.