Correlation Between Direct Digital and CarGurus
Can any of the company-specific risk be diversified away by investing in both Direct Digital and CarGurus 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 CarGurus 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 CarGurus, you can compare the effects of market volatilities on Direct Digital and CarGurus 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 CarGurus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Digital and CarGurus.
Diversification Opportunities for Direct Digital and CarGurus
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Direct and CarGurus is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Direct Digital Holdings and CarGurus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarGurus 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 CarGurus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarGurus has no effect on the direction of Direct Digital i.e., Direct Digital and CarGurus go up and down completely randomly.
Pair Corralation between Direct Digital and CarGurus
Given the investment horizon of 90 days Direct Digital is expected to generate 1.22 times less return on investment than CarGurus. In addition to that, Direct Digital is 3.53 times more volatile than CarGurus. It trades about 0.02 of its total potential returns per unit of risk. CarGurus is currently generating about 0.1 per unit of volatility. If you would invest 1,259 in CarGurus on August 24, 2024 and sell it today you would earn a total of 2,303 from holding CarGurus or generate 182.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direct Digital Holdings vs. CarGurus
Performance |
| Timeline |
| Direct Digital Holdings |
| CarGurus |
Direct Digital and CarGurus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direct Digital and CarGurus
The main advantage of trading using opposite Direct Digital and CarGurus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direct Digital position performs unexpectedly, CarGurus 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 CarGurus will offset losses from the drop in CarGurus' long position.| Direct Digital vs. Emerald Expositions Events | Direct Digital vs. Mirriad Advertising plc | Direct Digital vs. INEO Tech Corp | Direct Digital vs. Marchex |
| CarGurus vs. KAR Auction Services | CarGurus vs. Kingsway Financial Services | CarGurus vs. Driven Brands Holdings | CarGurus vs. Group 1 Automotive |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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