Correlation Between Omnicom and Canadian Natural
Can any of the company-specific risk be diversified away by investing in both Omnicom and Canadian Natural 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 Canadian Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Omnicom Group and Canadian Natural Resources, you can compare the effects of market volatilities on Omnicom and Canadian Natural 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 Canadian Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Omnicom and Canadian Natural.
Diversification Opportunities for Omnicom and Canadian Natural
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Omnicom and Canadian is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Omnicom Group and Canadian Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Natural Res 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 Canadian Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Natural Res has no effect on the direction of Omnicom i.e., Omnicom and Canadian Natural go up and down completely randomly.
Pair Corralation between Omnicom and Canadian Natural
Considering the 90-day investment horizon Omnicom Group is expected to generate 0.8 times more return on investment than Canadian Natural. However, Omnicom Group is 1.25 times less risky than Canadian Natural. It trades about -0.17 of its potential returns per unit of risk. Canadian Natural Resources is currently generating about -0.28 per unit of risk. If you would invest 8,652 in Omnicom Group on December 1, 2024 and sell it today you would lose (376.00) from holding Omnicom Group or give up 4.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Omnicom Group vs. Canadian Natural Resources
Performance |
| Timeline |
| Omnicom Group |
| Canadian Natural Res |
Omnicom and Canadian Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Omnicom and Canadian Natural
The main advantage of trading using opposite Omnicom and Canadian Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Omnicom position performs unexpectedly, Canadian Natural 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 Canadian Natural will offset losses from the drop in Canadian Natural's long position.The idea behind Omnicom Group and Canadian Natural Resources 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.| Canadian Natural vs. Baytex Energy Corp | Canadian Natural vs. Vermilion Energy | Canadian Natural vs. Obsidian Energy | Canadian Natural vs. Ovintiv |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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