Correlation Between Innodata and Digimarc

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

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

Diversification Opportunities for Innodata and Digimarc

0.71

Correlation Coefficient

Innodata  Digimarc

Poor diversification

The 3 months correlation between Innodata and Digimarc is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Innodata and Digimarc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digimarc and Innodata 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 Innodata 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 Innodata i.e., Innodata and Digimarc go up and down completely randomly.

Pair Corralation between Innodata and Digimarc

Given the investment horizon of 90 days Innodata is expected to generate 3.38 times more return on investment than Digimarc. However, Innodata is 3.38 times more volatile than Digimarc. It trades about 0.17 of its potential returns per unit of risk. Digimarc is currently generating about 0.15 per unit of risk. If you would invest  1,548  in Innodata on September 12, 2024 and sell it today you would earn a total of  2,280  from holding Innodata or generate 147.29% return on investment over 90 days.

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

Innodata  vs.  Digimarc

Innodata

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Innodata are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Innodata exhibited solid returns over the last few months and may actually be approaching a breakup point.

Digimarc

Risk-Adjusted Performance

11 of 100

OK

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 uncertain basic indicators, Digimarc exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Innodata and Digimarc

The main advantage of trading using opposite Innodata and Digimarc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innodata 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 Innodata 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.

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..