Correlation Between Digital Brand and Omnicom

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

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

Diversification Opportunities for Digital Brand and Omnicom

0.57

Correlation Coefficient

Digital Brand  Omnicom

Very weak diversification

The 3 months correlation between Digital and Omnicom is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Digital Brand Media and Omnicom Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Omnicom Group and Digital Brand 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 Digital Brand Media 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 Digital Brand i.e., Digital Brand and Omnicom go up and down completely randomly.

Pair Corralation between Digital Brand and Omnicom

Given the investment horizon of 90 days Digital Brand Media is expected to under-perform the Omnicom. In addition to that, Digital Brand is 5.89 times more volatile than Omnicom Group. It trades about -0.11 of its total potential returns per unit of risk. Omnicom Group is currently generating about 0.13 per unit of volatility. If you would invest  9,278  in Omnicom Group on January 26, 2024 and sell it today you would earn a total of  320.00  from holding Omnicom Group or generate 3.45% return on investment over 90 days.

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

Digital Brand Media  vs.  Omnicom Group

Digital Brand Media

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Digital Brand Media are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Digital Brand displayed solid returns over the last few months and may actually be approaching a breakup point.

Omnicom Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Omnicom Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, Omnicom may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Digital Brand and Omnicom

The main advantage of trading using opposite Digital Brand and Omnicom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Brand 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 Digital Brand Media 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.