Correlation Between DAIRY FARM and LVMH Mot
Can any of the company-specific risk be diversified away by investing in both DAIRY FARM 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 DAIRY FARM and LVMH Mot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DAIRY FARM INTL and LVMH Mot Hennessy, you can compare the effects of market volatilities on DAIRY FARM 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 DAIRY FARM with a short position of LVMH Mot. Check out your portfolio center. Please also check ongoing floating volatility patterns of DAIRY FARM and LVMH Mot.
Diversification Opportunities for DAIRY FARM and LVMH Mot
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between DAIRY and LVMH is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding DAIRY FARM INTL 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 DAIRY FARM 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 DAIRY FARM INTL 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 DAIRY FARM i.e., DAIRY FARM and LVMH Mot go up and down completely randomly.
Pair Corralation between DAIRY FARM and LVMH Mot
Assuming the 90 days trading horizon DAIRY FARM INTL is expected to generate 1.21 times more return on investment than LVMH Mot. However, DAIRY FARM is 1.21 times more volatile than LVMH Mot Hennessy. It trades about 0.1 of its potential returns per unit of risk. LVMH Mot Hennessy is currently generating about -0.03 per unit of risk. If you would invest 166.00 in DAIRY FARM INTL on September 30, 2024 and sell it today you would earn a total of 52.00 from holding DAIRY FARM INTL or generate 31.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
DAIRY FARM INTL vs. LVMH Mot Hennessy
Performance |
| Timeline |
| DAIRY FARM INTL |
| LVMH Mot Hennessy |
DAIRY FARM and LVMH Mot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DAIRY FARM and LVMH Mot
The main advantage of trading using opposite DAIRY FARM and LVMH Mot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DAIRY FARM 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 DAIRY FARM INTL 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. Herms International Socit | LVMH Mot vs. CHRISTIAN DIOR ADR14EO2 | LVMH Mot vs. The Swatch Group | LVMH Mot 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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