Correlation Between Eramet SA and LVMH Mot
Can any of the company-specific risk be diversified away by investing in both Eramet SA 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 Eramet SA and LVMH Mot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eramet SA and LVMH Mot Hennessy, you can compare the effects of market volatilities on Eramet SA 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 Eramet SA with a short position of LVMH Mot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eramet SA and LVMH Mot.
Diversification Opportunities for Eramet SA and LVMH Mot
Very poor diversification
The 3 months correlation between Eramet and LVMH is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Eramet 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 Eramet SA 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 Eramet 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 Eramet SA i.e., Eramet SA and LVMH Mot go up and down completely randomly.
Pair Corralation between Eramet SA and LVMH Mot
Assuming the 90 days trading horizon Eramet SA is expected to under-perform the LVMH Mot. In addition to that, Eramet SA is 1.46 times more volatile than LVMH Mot Hennessy. It trades about -0.11 of its total potential returns per unit of risk. LVMH Mot Hennessy is currently generating about -0.07 per unit of volatility. If you would invest 60,980 in LVMH Mot Hennessy on September 1, 2024 and sell it today you would lose (1,730) from holding LVMH Mot Hennessy or give up 2.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eramet SA vs. LVMH Mot Hennessy
Performance |
| Timeline |
| Eramet SA |
| LVMH Mot Hennessy |
Eramet SA and LVMH Mot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eramet SA and LVMH Mot
The main advantage of trading using opposite Eramet SA and LVMH Mot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eramet SA 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 Eramet 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
Other Complementary Tools
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges |