Correlation Between Digimarc and USA Recycling

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

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

Diversification Opportunities for Digimarc and USA Recycling

-0.75

Correlation Coefficient

Digimarc  USA Recycling

Pay attention - limited upside

The 3 months correlation between Digimarc and USA is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Digimarc and USA Recycling Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USA Recycling Industries 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 USA Recycling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USA Recycling Industries has no effect on the direction of Digimarc i.e., Digimarc and USA Recycling go up and down completely randomly.

Pair Corralation between Digimarc and USA Recycling

Given the investment horizon of 90 days Digimarc is expected to generate 0.43 times more return on investment than USA Recycling. However, Digimarc is 2.34 times less risky than USA Recycling. It trades about 0.07 of its potential returns per unit of risk. USA Recycling Industries is currently generating about -0.09 per unit of risk. If you would invest  3,048  in Digimarc on September 29, 2024 and sell it today you would earn a total of  752.00  from holding Digimarc or generate 24.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Digimarc  vs.  USA Recycling Industries

Digimarc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Digimarc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Digimarc exhibited solid returns over the last few months and may actually be approaching a breakup point.

USA Recycling Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days USA Recycling Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Digimarc and USA Recycling

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

The idea behind Digimarc and USA Recycling Industries 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.