Correlation Between Digimarc and Primo Water

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

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

Diversification Opportunities for Digimarc and Primo Water

0.83

Correlation Coefficient

Digimarc  Primo Water

Very poor diversification

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

Pair Corralation between Digimarc and Primo Water

Given the investment horizon of 90 days Digimarc is expected to generate 2.09 times more return on investment than Primo Water. However, Digimarc is 2.09 times more volatile than Primo Water Corp. It trades about 0.15 of its potential returns per unit of risk. Primo Water Corp is currently generating about -0.02 per unit of risk. If you would invest  2,788  in Digimarc on September 23, 2024 and sell it today you would earn a total of  904.00  from holding Digimarc or generate 32.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	55.38%
Values	Daily Returns

Digimarc  vs.  Primo Water Corp

Digimarc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Digimarc are ranked lower than 11 (%) 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.

Primo Water Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Primo Water Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable primary indicators, Primo Water is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Digimarc and Primo Water

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

The idea behind Digimarc and Primo Water 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.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.