Correlation Between Fidelity National and Digimarc

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

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

Diversification Opportunities for Fidelity National and Digimarc

0.78

Correlation Coefficient

Fidelity National  Digimarc

Poor diversification

The 3 months correlation between Fidelity and Digimarc is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity National Information and Digimarc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digimarc and Fidelity National 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 Fidelity National Information 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 Fidelity National i.e., Fidelity National and Digimarc go up and down completely randomly.

Pair Corralation between Fidelity National and Digimarc

Considering the 90-day investment horizon Fidelity National is expected to generate 1.52 times less return on investment than Digimarc. But when comparing it to its historical volatility, Fidelity National Information is 1.97 times less risky than Digimarc. It trades about 0.05 of its potential returns per unit of risk. Digimarc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,194  in Digimarc on August 16, 2024 and sell it today you would earn a total of  952.00  from holding Digimarc or generate 43.39% return on investment over 90 days.

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

Fidelity National Information  vs.  Digimarc

Fidelity National

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity National Information are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, Fidelity National may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Digimarc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Digimarc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Digimarc exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fidelity National and Digimarc

The main advantage of trading using opposite Fidelity National and Digimarc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity National 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 Fidelity National Information 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.