Correlation Between Home Federal and Digimarc

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

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

Diversification Opportunities for Home Federal and Digimarc

0.84

Correlation Coefficient

Home Federal  Digimarc

Very poor diversification

The 3 months correlation between Home and Digimarc is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and Digimarc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digimarc and Home Federal 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 Home Federal Bancorp 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 Home Federal i.e., Home Federal and Digimarc go up and down completely randomly.

Pair Corralation between Home Federal and Digimarc

Given the investment horizon of 90 days Home Federal Bancorp is expected to generate 0.88 times more return on investment than Digimarc. However, Home Federal Bancorp is 1.14 times less risky than Digimarc. It trades about -0.13 of its potential returns per unit of risk. Digimarc is currently generating about -0.5 per unit of risk. If you would invest  1,222  in Home Federal Bancorp on February 1, 2024 and sell it today you would lose (62.00) from holding Home Federal Bancorp or give up 5.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Home Federal Bancorp  vs.  Digimarc

Home Federal Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Home Federal Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

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 fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Home Federal and Digimarc

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

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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.