Correlation Between Omnicom and ZW Data

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

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

Diversification Opportunities for Omnicom and ZW Data

0.47

Correlation Coefficient

Omnicom  ZW Data

Very weak diversification

The 3 months correlation between Omnicom and CNET is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Omnicom Group and ZW Data Action in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZW Data Action 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 ZW Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZW Data Action has no effect on the direction of Omnicom i.e., Omnicom and ZW Data go up and down completely randomly.

Pair Corralation between Omnicom and ZW Data

Considering the 90-day investment horizon Omnicom is expected to generate 2.3 times less return on investment than ZW Data. But when comparing it to its historical volatility, Omnicom Group is 2.77 times less risky than ZW Data. It trades about 0.1 of its potential returns per unit of risk. ZW Data Action is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  90.00  in ZW Data Action on January 25, 2024 and sell it today you would earn a total of  5.00  from holding ZW Data Action or generate 5.56% return on investment over 90 days.

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

Omnicom Group  vs.  ZW Data Action

Omnicom Group

Risk-Adjusted Performance

6 of 100

Insignificant

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.

ZW Data Action

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ZW Data Action are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, ZW Data unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Omnicom and ZW Data

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

The idea behind Omnicom Group and ZW Data Action 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 Commodity Directory module to find actively traded commodities issued by global exchanges.