Correlation Between Digimarc and Parsons Corp

Can any of the company-specific risk be diversified away by investing in both Digimarc and Parsons Corp 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 Digimarc and Parsons Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Digimarc and Parsons Corp, you can compare the effects of market volatilities on Digimarc and Parsons Corp 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 Digimarc with a short position of Parsons Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digimarc and Parsons Corp.

Diversification Opportunities for Digimarc and Parsons Corp

-0.66

Correlation Coefficient

Digimarc  Parsons Corp

Excellent diversification

The 3 months correlation between Digimarc and Parsons is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Digimarc and Parsons Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parsons Corp and Digimarc 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 Digimarc are associated (or correlated) with Parsons Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parsons Corp has no effect on the direction of Digimarc i.e., Digimarc and Parsons Corp go up and down completely randomly.

Pair Corralation between Digimarc and Parsons Corp

Given the investment horizon of 90 days Digimarc is expected to generate 2.22 times more return on investment than Parsons Corp. However, Digimarc is 2.22 times more volatile than Parsons Corp. It trades about 0.06 of its potential returns per unit of risk. Parsons Corp is currently generating about 0.1 per unit of risk. If you would invest  1,995  in Digimarc on October 21, 2024 and sell it today you would earn a total of  2,133  from holding Digimarc or generate 106.92% return on investment over 90 days.

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

Digimarc  vs.  Parsons Corp

Digimarc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Digimarc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Digimarc exhibited solid returns over the last few months and may actually be approaching a breakup point.

Parsons Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Parsons Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Digimarc and Parsons Corp

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

The idea behind Digimarc and Parsons Corp 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.