Correlation Between Digimarc and Affirm Holdings

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

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

Diversification Opportunities for Digimarc and Affirm Holdings

0.85

Correlation Coefficient

Digimarc  Affirm Holdings

Very poor diversification

The 3 months correlation between Digimarc and Affirm is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Digimarc and Affirm Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Affirm Holdings 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 Affirm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Affirm Holdings has no effect on the direction of Digimarc i.e., Digimarc and Affirm Holdings go up and down completely randomly.

Pair Corralation between Digimarc and Affirm Holdings

Given the investment horizon of 90 days Digimarc is expected to under-perform the Affirm Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Digimarc is 1.93 times less risky than Affirm Holdings. The stock trades about -0.43 of its potential returns per unit of risk. The Affirm Holdings is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  3,392  in Affirm Holdings on January 19, 2024 and sell it today you would lose (305.00) from holding Affirm Holdings or give up 8.99% of portfolio value over 90 days.

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

Digimarc  vs.  Affirm Holdings

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 unsteady 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.

Affirm Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Affirm Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Digimarc and Affirm Holdings

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

The idea behind Digimarc and Affirm Holdings 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.