Correlation Between Digimarc and Soluna Holdings

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

By analyzing existing cross correlation between Digimarc and Soluna Holdings Preferred, you can compare the effects of market volatilities on Digimarc and Soluna Holdings 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 Soluna Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digimarc and Soluna Holdings.

Diversification Opportunities for Digimarc and Soluna Holdings

0.83

Correlation Coefficient

Digimarc  Soluna Holdings

Very poor diversification

The 3 months correlation between Digimarc and Soluna is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Digimarc and Soluna Holdings Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soluna Holdings Preferred 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 Soluna Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soluna Holdings Preferred has no effect on the direction of Digimarc i.e., Digimarc and Soluna Holdings go up and down completely randomly.

Pair Corralation between Digimarc and Soluna Holdings

Given the investment horizon of 90 days Digimarc is expected to generate 3.89 times less return on investment than Soluna Holdings. But when comparing it to its historical volatility, Digimarc is 2.17 times less risky than Soluna Holdings. It trades about 0.05 of its potential returns per unit of risk. Soluna Holdings Preferred is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  188.00  in Soluna Holdings Preferred on August 31, 2024 and sell it today you would earn a total of  1,086  from holding Soluna Holdings Preferred or generate 577.66% return on investment over 90 days.

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

Digimarc  vs.  Soluna Holdings Preferred

Digimarc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Digimarc are ranked lower than 8 (%) 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.

Soluna Holdings Preferred

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Soluna Holdings Preferred are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent technical indicators, Soluna Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Digimarc and Soluna Holdings

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

The idea behind Digimarc and Soluna Holdings Preferred 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.