Correlation Between News Corp and Omnicom

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

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

Diversification Opportunities for News Corp and Omnicom

0.17

Correlation Coefficient

News Corp  Omnicom

Average diversification

The 3 months correlation between News and Omnicom is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding News Corp A and Omnicom Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Omnicom Group and News Corp 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 News Corp A 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 News Corp i.e., News Corp and Omnicom go up and down completely randomly.

Pair Corralation between News Corp and Omnicom

Given the investment horizon of 90 days News Corp A is expected to under-perform the Omnicom. But the stock apears to be less risky and, when comparing its historical volatility, News Corp A is 1.27 times less risky than Omnicom. The stock trades about -0.3 of its potential returns per unit of risk. The Omnicom Group is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  9,337  in Omnicom Group on January 24, 2024 and sell it today you would earn a total of  40.00  from holding Omnicom Group or generate 0.43% return on investment over 90 days.

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

News Corp A  vs.  Omnicom Group

News Corp A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days News Corp A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, News Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 conflicting primary indicators, Omnicom may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with News Corp and Omnicom

The main advantage of trading using opposite News Corp and Omnicom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if News Corp 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 News Corp A 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.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.