Correlation Between Dell Technologies and Digimarc

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

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

Diversification Opportunities for Dell Technologies and Digimarc

-0.86

Correlation Coefficient

Dell Technologies  Digimarc

Pay attention - limited upside

The 3 months correlation between Dell and Digimarc is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Dell Technologies and Digimarc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digimarc and Dell Technologies 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 Dell Technologies 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 Dell Technologies i.e., Dell Technologies and Digimarc go up and down completely randomly.

Pair Corralation between Dell Technologies and Digimarc

Given the investment horizon of 90 days Dell Technologies is expected to generate 1.85 times more return on investment than Digimarc. However, Dell Technologies is 1.85 times more volatile than Digimarc. It trades about 0.15 of its potential returns per unit of risk. Digimarc is currently generating about -0.43 per unit of risk. If you would invest  9,289  in Dell Technologies on January 29, 2024 and sell it today you would earn a total of  3,217  from holding Dell Technologies or generate 34.63% return on investment over 90 days.

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

Dell Technologies  vs.  Digimarc

Dell Technologies

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dell Technologies are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, Dell Technologies disclosed solid returns over the last few months and may actually be approaching a breakup point.

Digimarc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Digimarc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Dell Technologies and Digimarc

The main advantage of trading using opposite Dell Technologies and Digimarc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dell Technologies 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 Dell Technologies 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.