A family of Microsoft word processing software products for creating web, email, and print documents.
Watermarks go into the Header & Footer story of a Word document. When you insert an image into a document, usually you are inserting it into the Content story. Think of these stories as planes, layers, or levels that are staked upon each other. The content story is the "top" story or said another way it's in the foreground. Watermarks are actually in the background and text layers over them, and not the other way around.
So if you want a Watermark on your image, then they have to be placed in the same story layer and then you can use the Arrange feature to place one above or behind the other ... but that only applies to the layer they are in together.
If you need a watermark on your image, it's far better to make a new image that includes, permanently as part of it, the watermark.
Hope this helps