Correlation Between Omnicom and CMG Holdings

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

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

Diversification Opportunities for Omnicom and CMG Holdings

0.18

Correlation Coefficient

Omnicom  CMG Holdings

Average diversification

The 3 months correlation between Omnicom and CMG is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Omnicom Group and CMG Holdings Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMG Holdings Group 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 CMG Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CMG Holdings Group has no effect on the direction of Omnicom i.e., Omnicom and CMG Holdings go up and down completely randomly.

Pair Corralation between Omnicom and CMG Holdings

Considering the 90-day investment horizon Omnicom Group is expected to under-perform the CMG Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Omnicom Group is 5.89 times less risky than CMG Holdings. The stock trades about -0.1 of its potential returns per unit of risk. The CMG Holdings Group is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  0.25  in CMG Holdings Group on September 25, 2024 and sell it today you would lose (0.07) from holding CMG Holdings Group or give up 28.0% of portfolio value over 90 days.

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

Omnicom Group  vs.  CMG Holdings Group

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 unfluctuating 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.

CMG Holdings Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CMG Holdings Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile technical and fundamental indicators, CMG Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Omnicom and CMG Holdings

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

The idea behind Omnicom Group and CMG Holdings 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.

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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 Global Correlations module to find global opportunities by holding instruments from different markets.