Correlation Between Digimarc and PENSKE

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

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

Diversification Opportunities for Digimarc and PENSKE

-0.59

Correlation Coefficient

Digimarc  PENSKE

Excellent diversification

The 3 months correlation between Digimarc and PENSKE is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Digimarc and PENSKE AUTOMOTIVE GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PENSKE AUTOMOTIVE 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 PENSKE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PENSKE AUTOMOTIVE has no effect on the direction of Digimarc i.e., Digimarc and PENSKE go up and down completely randomly.

Pair Corralation between Digimarc and PENSKE

Given the investment horizon of 90 days Digimarc is expected to generate 11.24 times more return on investment than PENSKE. However, Digimarc is 11.24 times more volatile than PENSKE AUTOMOTIVE GROUP. It trades about 0.06 of its potential returns per unit of risk. PENSKE AUTOMOTIVE GROUP is currently generating about 0.02 per unit of risk. If you would invest  1,843  in Digimarc on September 24, 2024 and sell it today you would earn a total of  1,906  from holding Digimarc or generate 103.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.4%
Values	Daily Returns

Digimarc  vs.  PENSKE AUTOMOTIVE GROUP

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.

PENSKE AUTOMOTIVE

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Digimarc and PENSKE

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

The idea behind Digimarc and PENSKE AUTOMOTIVE GROUP 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.