Correlation Between Direct Digital and Xunlei

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

Diversification Opportunities for Direct Digital and Xunlei

-0.31

Correlation Coefficient

Direct Digital  Xunlei

Very good diversification

The 3 months correlation between Direct and Xunlei is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Direct Digital Holdings and Xunlei Ltd Adr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xunlei Ltd Adr 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 Xunlei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xunlei Ltd Adr has no effect on the direction of Direct Digital i.e., Direct Digital and Xunlei go up and down completely randomly.

Pair Corralation between Direct Digital and Xunlei

Given the investment horizon of 90 days Direct Digital is expected to generate 3.05 times less return on investment than Xunlei. In addition to that, Direct Digital is 1.76 times more volatile than Xunlei Ltd Adr. It trades about 0.03 of its total potential returns per unit of risk. Xunlei Ltd Adr is currently generating about 0.14 per unit of volatility. If you would invest  276.00  in Xunlei Ltd Adr on February 6, 2025 and sell it today you would earn a total of  171.00  from holding Xunlei Ltd Adr or generate 61.96% 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.  Xunlei Ltd Adr

Direct Digital Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Direct Digital Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Direct Digital unveiled solid returns over the last few months and may actually be approaching a breakup point.

Xunlei Ltd Adr

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xunlei Ltd Adr are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical and fundamental indicators, Xunlei unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Direct Digital and Xunlei

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

The idea behind Direct Digital Holdings and Xunlei Ltd Adr 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.