Correlation Between Amazon and Omnicom

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

Diversification Opportunities for Amazon and Omnicom

-0.71
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Amazon and Omnicom is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Omnicom Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Omnicom Group and Amazon 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 Amazon Inc 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 Amazon i.e., Amazon and Omnicom go up and down completely randomly.

Pair Corralation between Amazon and Omnicom

Given the investment horizon of 90 days Amazon is expected to generate 8.81 times less return on investment than Omnicom. In addition to that, Amazon is 2.6 times more volatile than Omnicom Group. It trades about 0.01 of its total potential returns per unit of risk. Omnicom Group is currently generating about 0.3 per unit of volatility. If you would invest  7,310  in Omnicom Group on September 2, 2022 and sell it today you would earn a total of  666.00  from holding Omnicom Group or generate 9.11% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Amazon Inc  vs.  Omnicom Group

 Performance (%) 
       Timeline  
Amazon Inc 
Amazon Performance
0 of 100
Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2023. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Amazon Price Channel

Omnicom Group 
Omnicom Performance
14 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Omnicom Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Omnicom sustained solid returns over the last few months and may actually be approaching a breakup point.

Omnicom Price Channel

Amazon and Omnicom Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Amazon and Omnicom

The main advantage of trading using opposite Amazon and Omnicom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon 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.
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The idea behind Amazon Inc 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.
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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