Correlation Between Dentsu and Publicis Groupe

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

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

Diversification Opportunities for Dentsu and Publicis Groupe

-0.33

Correlation Coefficient

Dentsu  Publicis Groupe

Very good diversification

The 3 months correlation between Dentsu and Publicis is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Dentsu Group and Publicis Groupe SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Publicis Groupe SA and Dentsu 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 Dentsu Group are associated (or correlated) with Publicis Groupe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Publicis Groupe SA has no effect on the direction of Dentsu i.e., Dentsu and Publicis Groupe go up and down completely randomly.

Pair Corralation between Dentsu and Publicis Groupe

Assuming the 90 days horizon Dentsu Group is expected to generate 0.93 times more return on investment than Publicis Groupe. However, Dentsu Group is 1.07 times less risky than Publicis Groupe. It trades about 0.07 of its potential returns per unit of risk. Publicis Groupe SA is currently generating about -0.02 per unit of risk. If you would invest  2,300  in Dentsu Group on September 25, 2024 and sell it today you would earn a total of  40.00  from holding Dentsu Group or generate 1.74% return on investment over 90 days.

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

Dentsu Group  vs.  Publicis Groupe SA

Dentsu Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dentsu Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Publicis Groupe SA

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Publicis Groupe SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Publicis Groupe is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Dentsu and Publicis Groupe

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

The idea behind Dentsu Group and Publicis Groupe SA 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.