Correlation Between SPARTAN STORES and Omnicom

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

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

Diversification Opportunities for SPARTAN STORES and Omnicom

0.03

Correlation Coefficient

SPARTAN STORES  Omnicom

Significant diversification

The 3 months correlation between SPARTAN and Omnicom is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding SPARTAN STORES and Omnicom Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Omnicom Group and SPARTAN STORES 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 SPARTAN STORES 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 SPARTAN STORES i.e., SPARTAN STORES and Omnicom go up and down completely randomly.

Pair Corralation between SPARTAN STORES and Omnicom

Assuming the 90 days trading horizon SPARTAN STORES is expected to generate 1.41 times more return on investment than Omnicom. However, SPARTAN STORES is 1.41 times more volatile than Omnicom Group. It trades about 0.06 of its potential returns per unit of risk. Omnicom Group is currently generating about -0.34 per unit of risk. If you would invest  1,730  in SPARTAN STORES on October 8, 2024 and sell it today you would earn a total of  30.00  from holding SPARTAN STORES or generate 1.73% return on investment over 90 days.

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

SPARTAN STORES  vs.  Omnicom Group

SPARTAN STORES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPARTAN STORES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking indicators, SPARTAN STORES is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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. 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.

Pair Trading with SPARTAN STORES and Omnicom

The main advantage of trading using opposite SPARTAN STORES and Omnicom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPARTAN STORES 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 SPARTAN STORES 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .