Correlation Between WPP PLC and Omnicom
Can any of the company-specific risk be diversified away by investing in both WPP PLC 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 WPP PLC and Omnicom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WPP PLC ADR and Omnicom Group, you can compare the effects of market volatilities on WPP PLC 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 WPP PLC with a short position of Omnicom. Check out your portfolio center. Please also check ongoing floating volatility patterns of WPP PLC and Omnicom.
Diversification Opportunities for WPP PLC and Omnicom
Good diversification
The 3 months correlation between WPP and Omnicom is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding WPP PLC ADR and Omnicom Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Omnicom Group and WPP PLC 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 WPP PLC ADR 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 WPP PLC i.e., WPP PLC and Omnicom go up and down completely randomly.
Pair Corralation between WPP PLC and Omnicom
Assuming the 90 days trading horizon WPP PLC ADR is expected to generate 0.85 times more return on investment than Omnicom. However, WPP PLC ADR is 1.18 times less risky than Omnicom. It trades about 0.13 of its potential returns per unit of risk. Omnicom Group is currently generating about -0.07 per unit of risk. If you would invest 4,427 in WPP PLC ADR on September 26, 2024 and sell it today you would earn a total of 553.00 from holding WPP PLC ADR or generate 12.49% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
WPP PLC ADR vs. Omnicom Group
Performance |
Timeline |
WPP PLC ADR |
Omnicom Group |
WPP PLC and Omnicom Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with WPP PLC and Omnicom
The main advantage of trading using opposite WPP PLC and Omnicom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WPP PLC 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 WPP PLC ADR 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
Other Complementary Tools
Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
Stocks Directory Find actively traded stocks across global markets |