Correlation Between Omnicom and Twitter

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Can any of the company-specific risk be diversified away by investing in both Omnicom and Twitter 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 Twitter into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Omnicom Group and Twitter, you can compare the effects of market volatilities on Omnicom and Twitter 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 Twitter. Check out your portfolio center. Please also check ongoing floating volatility patterns of Omnicom and Twitter.

Diversification Opportunities for Omnicom and Twitter

0.46
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Omnicom and Twitter is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Omnicom Group and Twitter in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Twitter 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 Twitter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Twitter has no effect on the direction of Omnicom i.e., Omnicom and Twitter go up and down completely randomly.

Pair Corralation between Omnicom and Twitter

Considering the 90-day investment horizon Omnicom Group is expected to under-perform the Twitter. In addition to that, Omnicom is 1.05 times more volatile than Twitter. It trades about -0.39 of its total potential returns per unit of risk. Twitter is currently generating about -0.05 per unit of volatility. If you would invest  3,960  in Twitter on March 31, 2022 and sell it today you would lose (81.00)  from holding Twitter or give up 2.05% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Omnicom Group  vs.  Twitter

 Performance (%) 
      Timeline 
Omnicom Group 
Omnicom Performance
0 of 100
Over the last 90 days Omnicom Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's primary indicators remain somewhat strong which may send shares a bit higher in July 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Omnicom Price Channel

Twitter 
Twitter Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Twitter are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Twitter may actually be approaching a critical reversion point that can send shares even higher in July 2022.

Twitter Price Channel

Omnicom and Twitter Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Omnicom and Twitter

The main advantage of trading using opposite Omnicom and Twitter positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Omnicom position performs unexpectedly, Twitter 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 Twitter will offset losses from the drop in Twitter's long position.
The idea behind Omnicom Group and Twitter 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 Watchlist Optimization module to optimize watchlists to build efficient portfolio or rebalance existing positions based on mean-variance optimization algorithm.

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