Correlation Between BBVA Banco and LVMH Moët
Can any of the company-specific risk be diversified away by investing in both BBVA Banco and LVMH Moët 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 BBVA Banco and LVMH Moët into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BBVA Banco Frances and LVMH Mot Hennessy, you can compare the effects of market volatilities on BBVA Banco and LVMH Moët 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 BBVA Banco with a short position of LVMH Moët. Check out your portfolio center. Please also check ongoing floating volatility patterns of BBVA Banco and LVMH Moët.
Diversification Opportunities for BBVA Banco and LVMH Moët
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between BBVA and LVMH is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding BBVA Banco Frances and LVMH Mot Hennessy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LVMH Mot Hennessy and BBVA Banco 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 BBVA Banco Frances are associated (or correlated) with LVMH Moët. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LVMH Mot Hennessy has no effect on the direction of BBVA Banco i.e., BBVA Banco and LVMH Moët go up and down completely randomly.
Pair Corralation between BBVA Banco and LVMH Moët
Assuming the 90 days horizon BBVA Banco Frances is expected to generate 6.55 times more return on investment than LVMH Moët. However, BBVA Banco is 6.55 times more volatile than LVMH Mot Hennessy. It trades about 0.24 of its potential returns per unit of risk. LVMH Mot Hennessy is currently generating about 0.12 per unit of risk. If you would invest 1,660 in BBVA Banco Frances on October 15, 2024 and sell it today you would earn a total of 560.00 from holding BBVA Banco Frances or generate 33.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BBVA Banco Frances vs. LVMH Mot Hennessy
Performance |
| Timeline |
| BBVA Banco Frances |
| LVMH Mot Hennessy |
BBVA Banco and LVMH Moët Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BBVA Banco and LVMH Moët
The main advantage of trading using opposite BBVA Banco and LVMH Moët positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BBVA Banco position performs unexpectedly, LVMH Moët 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 LVMH Moët will offset losses from the drop in LVMH Moët's long position.| BBVA Banco vs. Darden Restaurants | BBVA Banco vs. Sunstone Hotel Investors | BBVA Banco vs. COMPUTERSHARE | BBVA Banco vs. Luckin Coffee |
| LVMH Moët vs. LVMH Mot Hennessy | LVMH Moët vs. Christian Dior SE | LVMH Moët vs. Compagnie Financire Richemont |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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