Correlation Between Digimarc and BAKER

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

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

Diversification Opportunities for Digimarc and BAKER

-0.62

Correlation Coefficient

Digimarc  BAKER

Excellent diversification

The 3 months correlation between Digimarc and BAKER is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Digimarc and BAKER HUGHES A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BAKER HUGHES A 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 BAKER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BAKER HUGHES A has no effect on the direction of Digimarc i.e., Digimarc and BAKER go up and down completely randomly.

Pair Corralation between Digimarc and BAKER

Given the investment horizon of 90 days Digimarc is expected to generate 11.42 times less return on investment than BAKER. But when comparing it to its historical volatility, Digimarc is 13.26 times less risky than BAKER. It trades about 0.05 of its potential returns per unit of risk. BAKER HUGHES A is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  8,427  in BAKER HUGHES A on October 3, 2024 and sell it today you would lose (206.00) from holding BAKER HUGHES A or give up 2.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	85.25%
Values	Daily Returns

Digimarc  vs.  BAKER HUGHES A

Digimarc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Digimarc are ranked lower than 12 (%) 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.

BAKER HUGHES A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BAKER HUGHES A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BAKER is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Digimarc and BAKER

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

The idea behind Digimarc and BAKER HUGHES A 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.

Check out your portfolio center.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.