Correlation Between Verizon Communications and Omnicom
Can any of the company-specific risk be diversified away by investing in both Verizon Communications 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 Verizon Communications and Omnicom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Omnicom Group, you can compare the effects of market volatilities on Verizon Communications 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 Verizon Communications with a short position of Omnicom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and Omnicom.
Diversification Opportunities for Verizon Communications and Omnicom
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Verizon and Omnicom is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Omnicom Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Omnicom Group and Verizon Communications 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 Verizon Communications 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 Verizon Communications i.e., Verizon Communications and Omnicom go up and down completely randomly.
Pair Corralation between Verizon Communications and Omnicom
Allowing for the 90-day total investment horizon Verizon Communications is expected to under-perform the Omnicom. In addition to that, Verizon Communications is 1.04 times more volatile than Omnicom Group. It trades about -0.15 of its total potential returns per unit of risk. Omnicom Group is currently generating about 0.02 per unit of volatility. If you would invest 9,337 in Omnicom Group on January 24, 2024 and sell it today you would earn a total of 40.00 from holding Omnicom Group or generate 0.43% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 95.24% |
Values | Daily Returns |
Verizon Communications vs. Omnicom Group
Performance |
Timeline |
Verizon Communications |
Omnicom Group |
Verizon Communications and Omnicom Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Verizon Communications and Omnicom
The main advantage of trading using opposite Verizon Communications and Omnicom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications 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.Verizon Communications vs. T Mobile | Verizon Communications vs. Comcast Corp | Verizon Communications vs. Charter Communications | Verizon Communications vs. Vodafone Group PLC |
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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