Correlation Between Omnicom and CyberAgent

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Can any of the company-specific risk be diversified away by investing in both Omnicom and CyberAgent 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 Omnicom and CyberAgent into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Omnicom Group and CyberAgent, you can compare the effects of market volatilities on Omnicom and CyberAgent 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 Omnicom with a short position of CyberAgent. Check out your portfolio center. Please also check ongoing floating volatility patterns of Omnicom and CyberAgent.

Diversification Opportunities for Omnicom and CyberAgent

-0.46
  Correlation Coefficient

Very good diversification

The 3 months correlation between Omnicom and CyberAgent is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Omnicom Group and CyberAgent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CyberAgent and Omnicom 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 Omnicom Group are associated (or correlated) with CyberAgent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CyberAgent has no effect on the direction of Omnicom i.e., Omnicom and CyberAgent go up and down completely randomly.

Pair Corralation between Omnicom and CyberAgent

Assuming the 90 days horizon Omnicom Group is expected to generate 0.59 times more return on investment than CyberAgent. However, Omnicom Group is 1.7 times less risky than CyberAgent. It trades about 0.03 of its potential returns per unit of risk. CyberAgent is currently generating about 0.0 per unit of risk. If you would invest  7,233  in Omnicom Group on September 24, 2024 and sell it today you would earn a total of  1,147  from holding Omnicom Group or generate 15.86% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Omnicom Group  vs.  CyberAgent

 Performance 
       Timeline  
Omnicom Group 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Omnicom Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Omnicom is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
CyberAgent 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in CyberAgent are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, CyberAgent is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Omnicom and CyberAgent Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Omnicom and CyberAgent

The main advantage of trading using opposite Omnicom and CyberAgent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Omnicom position performs unexpectedly, CyberAgent 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 CyberAgent will offset losses from the drop in CyberAgent's long position.
The idea behind Omnicom Group and CyberAgent 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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