Correlation Between BNP Paribas and LVMH Mot
Can any of the company-specific risk be diversified away by investing in both BNP Paribas and LVMH Mot 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 BNP Paribas and LVMH Mot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BNP Paribas SA and LVMH Mot Hennessy, you can compare the effects of market volatilities on BNP Paribas and LVMH Mot 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 BNP Paribas with a short position of LVMH Mot. Check out your portfolio center. Please also check ongoing floating volatility patterns of BNP Paribas and LVMH Mot.
Diversification Opportunities for BNP Paribas and LVMH Mot
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between BNP and LVMH is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding BNP Paribas SA 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 BNP Paribas 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 BNP Paribas SA are associated (or correlated) with LVMH Mot. 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 BNP Paribas i.e., BNP Paribas and LVMH Mot go up and down completely randomly.
Pair Corralation between BNP Paribas and LVMH Mot
Assuming the 90 days trading horizon BNP Paribas SA is expected to under-perform the LVMH Mot. But the stock apears to be less risky and, when comparing its historical volatility, BNP Paribas SA is 1.03 times less risky than LVMH Mot. The stock trades about -0.44 of its potential returns per unit of risk. The LVMH Mot Hennessy is currently generating about -0.19 of returns per unit of risk over similar time horizon. If you would invest 63,090 in LVMH Mot Hennessy on August 30, 2024 and sell it today you would lose (4,440) from holding LVMH Mot Hennessy or give up 7.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BNP Paribas SA vs. LVMH Mot Hennessy
Performance |
| Timeline |
| BNP Paribas SA |
| LVMH Mot Hennessy |
BNP Paribas and LVMH Mot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BNP Paribas and LVMH Mot
The main advantage of trading using opposite BNP Paribas and LVMH Mot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BNP Paribas position performs unexpectedly, LVMH Mot 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 Mot will offset losses from the drop in LVMH Mot's long position.The idea behind BNP Paribas SA and LVMH Mot Hennessy 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.| LVMH Mot vs. Kering SA | LVMH Mot vs. Hermes International SCA | LVMH Mot vs. LOreal SA | LVMH Mot vs. Air Liquide SA |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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