Correlation Between Direct Digital and Color Star

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

Diversification Opportunities for Direct Digital and Color Star

-0.38

Correlation Coefficient

Direct Digital  Color Star

Very good diversification

The 3 months correlation between Direct and Color is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Direct Digital Holdings and Color Star Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Color Star Technology 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 Color Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Color Star Technology has no effect on the direction of Direct Digital i.e., Direct Digital and Color Star go up and down completely randomly.

Pair Corralation between Direct Digital and Color Star

Given the investment horizon of 90 days Direct Digital is expected to generate 8.33 times less return on investment than Color Star. But when comparing it to its historical volatility, Direct Digital Holdings is 1.39 times less risky than Color Star. It trades about 0.01 of its potential returns per unit of risk. Color Star Technology is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  73.00  in Color Star Technology on April 23, 2025 and sell it today you would earn a total of  16.00  from holding Color Star Technology or generate 21.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Direct Digital Holdings  vs.  Color Star Technology

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 comparatively stable fundamental indicators, Direct Digital is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Color Star Technology

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Color Star Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Color Star exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Direct Digital and Color Star

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

The idea behind Direct Digital Holdings and Color Star Technology 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.