Correlation Between Omnicom and Roku
Can any of the company-specific risk be diversified away by investing in both Omnicom and Roku 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 Roku into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Omnicom Group and Roku Inc, you can compare the effects of market volatilities on Omnicom and Roku 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 Roku. Check out your portfolio center. Please also check ongoing floating volatility patterns of Omnicom and Roku.
Diversification Opportunities for Omnicom and Roku
Poor diversification
The 3 months correlation between Omnicom and Roku is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Omnicom Group and Roku Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roku Inc 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 Roku. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roku Inc has no effect on the direction of Omnicom i.e., Omnicom and Roku go up and down completely randomly.
Pair Corralation between Omnicom and Roku
Considering the 90-day investment horizon Omnicom is expected to generate 1.67 times less return on investment than Roku. But when comparing it to its historical volatility, Omnicom Group is 2.79 times less risky than Roku. It trades about 0.06 of its potential returns per unit of risk. Roku Inc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 5,120 in Roku Inc on August 27, 2024 and sell it today you would earn a total of 1,800 from holding Roku Inc or generate 35.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Omnicom Group vs. Roku Inc
Performance |
| Timeline |
| Omnicom Group |
| Roku Inc |
Omnicom and Roku Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Omnicom and Roku
The main advantage of trading using opposite Omnicom and Roku positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Omnicom position performs unexpectedly, Roku 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 Roku will offset losses from the drop in Roku's long position.The idea behind Omnicom Group and Roku Inc 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.| Roku vs. ADTRAN Inc | Roku vs. Belden Inc | Roku vs. ADC Therapeutics SA | Roku vs. Comtech Telecommunications Corp |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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