Correlation Between Marchex and Direct Digital
Can any of the company-specific risk be diversified away by investing in both Marchex 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 Marchex and Direct Digital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Marchex and Direct Digital Holdings, you can compare the effects of market volatilities on Marchex 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 Marchex with a short position of Direct Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marchex and Direct Digital.
Diversification Opportunities for Marchex and Direct Digital
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Marchex and Direct is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Marchex 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 Marchex 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 Marchex 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 Marchex i.e., Marchex and Direct Digital go up and down completely randomly.
Pair Corralation between Marchex and Direct Digital
Given the investment horizon of 90 days Marchex is expected to generate 0.36 times more return on investment than Direct Digital. However, Marchex is 2.82 times less risky than Direct Digital. It trades about 0.05 of its potential returns per unit of risk. Direct Digital Holdings is currently generating about -0.11 per unit of risk. If you would invest 137.00 in Marchex on August 27, 2024 and sell it today you would earn a total of 28.00 from holding Marchex or generate 20.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Marchex vs. Direct Digital Holdings
Performance |
| Timeline |
| Marchex |
| Direct Digital Holdings |
Marchex and Direct Digital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Marchex and Direct Digital
The main advantage of trading using opposite Marchex and Direct Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marchex 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.| Marchex vs. Entravision Communications | Marchex vs. Direct Digital Holdings | Marchex vs. Cimpress NV | Marchex vs. Townsquare Media |
| Direct Digital vs. ADTRAN Inc | Direct Digital vs. Belden Inc | Direct Digital vs. ADC Therapeutics SA | Direct Digital vs. Comtech Telecommunications Corp |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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