Correlation Between Omnicom and Entravision Communications
Can any of the company-specific risk be diversified away by investing in both Omnicom and Entravision Communications 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 Entravision Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Omnicom Group and Entravision Communications, you can compare the effects of market volatilities on Omnicom and Entravision Communications 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 Entravision Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Omnicom and Entravision Communications.
Diversification Opportunities for Omnicom and Entravision Communications
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Omnicom and Entravision is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Omnicom Group and Entravision Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entravision Communications 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 Entravision Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entravision Communications has no effect on the direction of Omnicom i.e., Omnicom and Entravision Communications go up and down completely randomly.
Pair Corralation between Omnicom and Entravision Communications
Considering the 90-day investment horizon Omnicom is expected to generate 26.28 times less return on investment than Entravision Communications. But when comparing it to its historical volatility, Omnicom Group is 1.66 times less risky than Entravision Communications. It trades about 0.01 of its potential returns per unit of risk. Entravision Communications is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 228.00 in Entravision Communications on August 27, 2024 and sell it today you would earn a total of 17.00 from holding Entravision Communications or generate 7.46% 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. Entravision Communications
Performance |
| Timeline |
| Omnicom Group |
| Entravision Communications |
Omnicom and Entravision Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Omnicom and Entravision Communications
The main advantage of trading using opposite Omnicom and Entravision Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Omnicom position performs unexpectedly, Entravision Communications 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 Entravision Communications will offset losses from the drop in Entravision Communications' long position.The idea behind Omnicom Group and Entravision Communications 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.| Entravision Communications vs. Marchex | Entravision Communications vs. Direct Digital Holdings | Entravision Communications vs. Cimpress NV | Entravision Communications vs. Townsquare Media |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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