Correlation Between Glory Star and Direct Digital

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

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

Diversification Opportunities for Glory Star and Direct Digital

0.13

Correlation Coefficient

Glory Star  Direct Digital

Average diversification

The 3 months correlation between Glory and Direct is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Glory Star New 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 Glory Star 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 Glory Star New 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 Glory Star i.e., Glory Star and Direct Digital go up and down completely randomly.

Pair Corralation between Glory Star and Direct Digital

Assuming the 90 days horizon Glory Star New is expected to generate 35.16 times more return on investment than Direct Digital. However, Glory Star is 35.16 times more volatile than Direct Digital Holdings. It trades about 0.2 of its potential returns per unit of risk. Direct Digital Holdings is currently generating about -0.38 per unit of risk. If you would invest  0.09  in Glory Star New on December 1, 2024 and sell it today you would earn a total of  0.00  from holding Glory Star New or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	57.14%
Values	Daily Returns

Glory Star New  vs.  Direct Digital Holdings

Glory Star New

Risk-Adjusted Performance

OK

Over the last 90 days Glory Star New has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly fragile technical and fundamental indicators, Glory Star showed solid returns over the last few months and may actually be approaching a breakup point.

Direct Digital Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Direct Digital Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Direct Digital unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Glory Star and Direct Digital

The main advantage of trading using opposite Glory Star and Direct Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Glory Star 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 Glory Star New 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.