Correlation Between Mastermind and Omnicom

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

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

Diversification Opportunities for Mastermind and Omnicom

0.29

Correlation Coefficient

Mastermind  Omnicom

Modest diversification

The 3 months correlation between Mastermind and Omnicom is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Mastermind and Omnicom Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Omnicom Group and Mastermind 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 Mastermind are associated (or correlated) with Omnicom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Omnicom Group has no effect on the direction of Mastermind i.e., Mastermind and Omnicom go up and down completely randomly.

Pair Corralation between Mastermind and Omnicom

Given the investment horizon of 90 days Mastermind is expected to generate 8.76 times more return on investment than Omnicom. However, Mastermind is 8.76 times more volatile than Omnicom Group. It trades about 0.1 of its potential returns per unit of risk. Omnicom Group is currently generating about -0.34 per unit of risk. If you would invest  5.00  in Mastermind on September 29, 2024 and sell it today you would earn a total of  0.00  from holding Mastermind or generate 0.0% return on investment over 90 days.

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

Mastermind  vs.  Omnicom Group

Mastermind

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mastermind are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Mastermind exhibited solid returns over the last few months and may actually be approaching a breakup point.

Omnicom Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Omnicom Group 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 primary indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Mastermind and Omnicom

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

The idea behind Mastermind and Omnicom Group 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.