Correlation Between Twitter and Omnicom

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

Diversification Opportunities for Twitter and Omnicom

-0.27
  Correlation Coefficient

Very good diversification

The 3 months correlation between Twitter and Omnicom is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Twitter and Omnicom Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Omnicom Group and Twitter 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 Twitter are associated (or correlated) with Omnicom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Omnicom Group has no effect on the direction of Twitter i.e., Twitter and Omnicom go up and down completely randomly.

Pair Corralation between Twitter and Omnicom

Given the investment horizon of 90 days Twitter is expected to generate 1.17 times less return on investment than Omnicom. In addition to that, Twitter is 1.6 times more volatile than Omnicom Group. It trades about 0.03 of its total potential returns per unit of risk. Omnicom Group is currently generating about 0.05 per unit of volatility. If you would invest  5,101  in Omnicom Group on February 22, 2022 and sell it today you would earn a total of  2,485  from holding Omnicom Group or generate 48.72% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Twitter  vs.  Omnicom Group

 Performance (%) 
      Timeline 
Twitter 
Twitter Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Twitter are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Twitter reported solid returns over the last few months and may actually be approaching a breakup point.

Twitter Price Channel

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 latest weak performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Omnicom Price Channel

Twitter and Omnicom Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Twitter and Omnicom

The main advantage of trading using opposite Twitter and Omnicom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Twitter position performs unexpectedly, Omnicom 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 Omnicom will offset losses from the drop in Omnicom's long position.
The idea behind Twitter and Omnicom Group 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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