Correlation Between Diageo PLC and LVMH Moet
Can any of the company-specific risk be diversified away by investing in both Diageo PLC and LVMH Moet 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 Diageo PLC and LVMH Moet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diageo PLC ADR and LVMH Moet Hennessy, you can compare the effects of market volatilities on Diageo PLC and LVMH Moet 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 Diageo PLC with a short position of LVMH Moet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diageo PLC and LVMH Moet.
Diversification Opportunities for Diageo PLC and LVMH Moet
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Diageo and LVMH is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and LVMH Moet Hennessy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LVMH Moet Hennessy and Diageo PLC 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 Diageo PLC ADR are associated (or correlated) with LVMH Moet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LVMH Moet Hennessy has no effect on the direction of Diageo PLC i.e., Diageo PLC and LVMH Moet go up and down completely randomly.
Pair Corralation between Diageo PLC and LVMH Moet
Considering the 90-day investment horizon Diageo PLC ADR is expected to under-perform the LVMH Moet. But the stock apears to be less risky and, when comparing its historical volatility, Diageo PLC ADR is 1.26 times less risky than LVMH Moet. The stock trades about -0.05 of its potential returns per unit of risk. The LVMH Moet Hennessy is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 14,911 in LVMH Moet Hennessy on August 27, 2024 and sell it today you would earn a total of 2,284 from holding LVMH Moet Hennessy or generate 15.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 9.07% |
| Values | Daily Returns |
Diageo PLC ADR vs. LVMH Moet Hennessy
Performance |
| Timeline |
| Diageo PLC ADR |
| LVMH Moet Hennessy |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Diageo PLC and LVMH Moet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diageo PLC and LVMH Moet
The main advantage of trading using opposite Diageo PLC and LVMH Moet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diageo PLC position performs unexpectedly, LVMH Moet 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 Moet will offset losses from the drop in LVMH Moet's long position.| Diageo PLC vs. Brown Forman | Diageo PLC vs. MGP Ingredients | Diageo PLC vs. Duckhorn Portfolio | Diageo PLC vs. Brown Forman |
| LVMH Moet vs. Hermes International SA | LVMH Moet vs. Hermes International SCA | LVMH Moet vs. Kering SA | LVMH Moet vs. Capri Holdings |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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