Correlation Between Digital Brands and Grom Social
Can any of the company-specific risk be diversified away by investing in both Digital Brands and Grom Social 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 Digital Brands and Grom Social into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Digital Brands Group and Grom Social Enterprises, you can compare the effects of market volatilities on Digital Brands and Grom Social 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 Digital Brands with a short position of Grom Social. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Brands and Grom Social.
Diversification Opportunities for Digital Brands and Grom Social
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Digital and Grom is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Digital Brands Group and Grom Social Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grom Social Enterprises and Digital Brands 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 Digital Brands Group are associated (or correlated) with Grom Social. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grom Social Enterprises has no effect on the direction of Digital Brands i.e., Digital Brands and Grom Social go up and down completely randomly.
Pair Corralation between Digital Brands and Grom Social
Given the investment horizon of 90 days Digital Brands Group is expected to generate 1.18 times more return on investment than Grom Social. However, Digital Brands is 1.18 times more volatile than Grom Social Enterprises. It trades about -0.07 of its potential returns per unit of risk. Grom Social Enterprises is currently generating about -0.12 per unit of risk. If you would invest 10,750 in Digital Brands Group on August 27, 2024 and sell it today you would lose (10,738) from holding Digital Brands Group or give up 99.89% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 86.9% |
| Values | Daily Returns |
Digital Brands Group vs. Grom Social Enterprises
Performance |
| Timeline |
| Digital Brands Group |
| Grom Social Enterprises |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Digital Brands and Grom Social Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Digital Brands and Grom Social
The main advantage of trading using opposite Digital Brands and Grom Social positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Brands position performs unexpectedly, Grom Social 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 Grom Social will offset losses from the drop in Grom Social's long position.| Digital Brands vs. Burlington Stores | Digital Brands vs. Urban Outfitters | Digital Brands vs. American Eagle Outfitters | Digital Brands vs. Childrens Place |
| Grom Social vs. Digital Brands Group | Grom Social vs. Paltalk | Grom Social vs. DatChat | Grom Social vs. Ensysce Biosciences |
Check out your portfolio center.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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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