Correlation Between Townsquare Media and Omnicom

Can any of the company-specific risk be diversified away by investing in both Townsquare Media 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 Townsquare Media and Omnicom into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Townsquare Media and Omnicom Group, you can compare the effects of market volatilities on Townsquare Media 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 Townsquare Media with a short position of Omnicom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Townsquare Media and Omnicom.

Diversification Opportunities for Townsquare Media and Omnicom

-0.53

Correlation Coefficient

Townsquare Media  Omnicom

Excellent diversification

The 3 months correlation between Townsquare and Omnicom is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Townsquare Media and Omnicom Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Omnicom Group and Townsquare Media 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 Townsquare Media 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 Townsquare Media i.e., Townsquare Media and Omnicom go up and down completely randomly.

Pair Corralation between Townsquare Media and Omnicom

Considering the 90-day investment horizon Townsquare Media is expected to generate 1.36 times more return on investment than Omnicom. However, Townsquare Media is 1.36 times more volatile than Omnicom Group. It trades about 0.26 of its potential returns per unit of risk. Omnicom Group is currently generating about 0.17 per unit of risk. If you would invest  965.00  in Townsquare Media on July 9, 2024 and sell it today you would earn a total of  69.00  from holding Townsquare Media or generate 7.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Townsquare Media  vs.  Omnicom Group

Townsquare Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Townsquare Media has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Townsquare Media is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Omnicom Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Omnicom Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain primary indicators, Omnicom may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Pair Trading with Townsquare Media and Omnicom

The main advantage of trading using opposite Townsquare Media and Omnicom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Townsquare Media 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 Townsquare Media 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 the Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.