Correlation Between Omnicom and Quad Graphics

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

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

Diversification Opportunities for Omnicom and Quad Graphics

-0.47

Correlation Coefficient

Omnicom  Quad Graphics

Very good diversification

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

Pair Corralation between Omnicom and Quad Graphics

Considering the 90-day investment horizon Omnicom Group is expected to generate 0.54 times more return on investment than Quad Graphics. However, Omnicom Group is 1.85 times less risky than Quad Graphics. It trades about 0.04 of its potential returns per unit of risk. Quad Graphics is currently generating about -0.24 per unit of risk. If you would invest  9,337  in Omnicom Group on January 25, 2024 and sell it today you would earn a total of  85.00  from holding Omnicom Group or generate 0.91% return on investment over 90 days.

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

Omnicom Group  vs.  Quad Graphics

Omnicom Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Omnicom Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Omnicom is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Quad Graphics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Quad Graphics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Omnicom and Quad Graphics

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

The idea behind Omnicom Group and Quad Graphics 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.