Correlation Between Direct Digital and Mirriad Advertising

Can any of the company-specific risk be diversified away by investing in both Direct Digital and Mirriad Advertising 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 Mirriad Advertising 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 Mirriad Advertising plc, you can compare the effects of market volatilities on Direct Digital and Mirriad Advertising 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 Mirriad Advertising. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Digital and Mirriad Advertising.

Diversification Opportunities for Direct Digital and Mirriad Advertising

-0.13

Correlation Coefficient

Direct Digital  Mirriad Advertising

Good diversification

The 3 months correlation between Direct and Mirriad is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Direct Digital Holdings and Mirriad Advertising plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mirriad Advertising plc 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 Mirriad Advertising. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mirriad Advertising plc has no effect on the direction of Direct Digital i.e., Direct Digital and Mirriad Advertising go up and down completely randomly.

Pair Corralation between Direct Digital and Mirriad Advertising

Given the investment horizon of 90 days Direct Digital Holdings is expected to generate 0.82 times more return on investment than Mirriad Advertising. However, Direct Digital Holdings is 1.21 times less risky than Mirriad Advertising. It trades about 0.12 of its potential returns per unit of risk. Mirriad Advertising plc is currently generating about -0.21 per unit of risk. If you would invest  52.00  in Direct Digital Holdings on February 13, 2025 and sell it today you would earn a total of  9.00  from holding Direct Digital Holdings or generate 17.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Direct Digital Holdings  vs.  Mirriad Advertising plc

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 latest weak performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Mirriad Advertising plc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mirriad Advertising plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Mirriad Advertising reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Direct Digital and Mirriad Advertising

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

The idea behind Direct Digital Holdings and Mirriad Advertising plc 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.