Correlation Between Publicis Groupe and Nextmart

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

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

Diversification Opportunities for Publicis Groupe and Nextmart

0.37

Correlation Coefficient

Publicis Groupe  Nextmart

Weak diversification

The 3 months correlation between Publicis and Nextmart is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Publicis Groupe SA and Nextmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextmart and Publicis Groupe 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 Publicis Groupe SA are associated (or correlated) with Nextmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextmart has no effect on the direction of Publicis Groupe i.e., Publicis Groupe and Nextmart go up and down completely randomly.

Pair Corralation between Publicis Groupe and Nextmart

Assuming the 90 days horizon Publicis Groupe SA is expected to under-perform the Nextmart. But the otc stock apears to be less risky and, when comparing its historical volatility, Publicis Groupe SA is 37.12 times less risky than Nextmart. The otc stock trades about -0.06 of its potential returns per unit of risk. The Nextmart is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Nextmart on December 21, 2024 and sell it today you would earn a total of  0.05  from holding Nextmart or generate 500.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.65%
Values	Daily Returns

Publicis Groupe SA  vs.  Nextmart

Publicis Groupe SA

Risk-Adjusted Performance

Very Weak

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

Nextmart

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nextmart are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, Nextmart reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Publicis Groupe and Nextmart

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

The idea behind Publicis Groupe SA and Nextmart 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.