Correlation Between Direct Digital and Sinclair Broadcast

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

Diversification Opportunities for Direct Digital and Sinclair Broadcast

-0.28

Correlation Coefficient

Direct Digital  Sinclair Broadcast

Very good diversification

The 3 months correlation between Direct and Sinclair is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Direct Digital Holdings and Sinclair Broadcast Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinclair Broadcast 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 Sinclair Broadcast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinclair Broadcast has no effect on the direction of Direct Digital i.e., Direct Digital and Sinclair Broadcast go up and down completely randomly.

Pair Corralation between Direct Digital and Sinclair Broadcast

Given the investment horizon of 90 days Direct Digital Holdings is expected to under-perform the Sinclair Broadcast. In addition to that, Direct Digital is 3.44 times more volatile than Sinclair Broadcast Group. It trades about -0.5 of its total potential returns per unit of risk. Sinclair Broadcast Group is currently generating about -0.12 per unit of volatility. If you would invest  1,705  in Sinclair Broadcast Group on September 23, 2024 and sell it today you would lose (97.00) from holding Sinclair Broadcast Group or give up 5.69% of portfolio value over 90 days.

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

Direct Digital Holdings  vs.  Sinclair Broadcast Group

Direct Digital Holdings

Risk-Adjusted Performance

0 of 100

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 unsteady performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Sinclair Broadcast

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sinclair Broadcast Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical and fundamental indicators, Sinclair Broadcast demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Direct Digital and Sinclair Broadcast

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

The idea behind Direct Digital Holdings and Sinclair Broadcast Group 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.