Correlation Between Data Storage and Digimarc

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

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

Diversification Opportunities for Data Storage and Digimarc

0.47

Correlation Coefficient

Data Storage  Digimarc

Very weak diversification

The 3 months correlation between Data and Digimarc is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Data Storage Corp and Digimarc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digimarc and Data Storage 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 Data Storage Corp are associated (or correlated) with Digimarc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digimarc has no effect on the direction of Data Storage i.e., Data Storage and Digimarc go up and down completely randomly.

Pair Corralation between Data Storage and Digimarc

Given the investment horizon of 90 days Data Storage Corp is expected to generate 1.53 times more return on investment than Digimarc. However, Data Storage is 1.53 times more volatile than Digimarc. It trades about 0.06 of its potential returns per unit of risk. Digimarc is currently generating about 0.03 per unit of risk. If you would invest  276.00  in Data Storage Corp on September 12, 2024 and sell it today you would earn a total of  199.00  from holding Data Storage Corp or generate 72.1% return on investment over 90 days.

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

Data Storage Corp  vs.  Digimarc

Data Storage Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Data Storage Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Data Storage unveiled solid returns over the last few months and may actually be approaching a breakup point.

Digimarc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Digimarc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Digimarc exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Data Storage and Digimarc

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

The idea behind Data Storage Corp and Digimarc 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.