Correlation Between Ford and LVMH Moët
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and LVMH Moët into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and LVMH Mot Hennessy, you can compare the effects of market volatilities on Ford 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 Ford with a short position of LVMH Moët. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and LVMH Moët.
Diversification Opportunities for Ford and LVMH Moët
Excellent diversification
The 3 months correlation between Ford and LVMH is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor 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 Ford 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 Ford Motor 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 Ford i.e., Ford and LVMH Moët go up and down completely randomly.
Pair Corralation between Ford and LVMH Moët
Taking into account the 90-day investment horizon Ford is expected to generate 3.21 times less return on investment than LVMH Moët. But when comparing it to its historical volatility, Ford Motor is 1.48 times less risky than LVMH Moët. It trades about 0.08 of its potential returns per unit of risk. LVMH Mot Hennessy is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 63,510 in LVMH Mot Hennessy on November 7, 2024 and sell it today you would earn a total of 5,830 from holding LVMH Mot Hennessy or generate 9.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 90.91% |
| Values | Daily Returns |
Ford Motor vs. LVMH Mot Hennessy
Performance |
| Timeline |
| Ford Motor |
| LVMH Mot Hennessy |
Ford and LVMH Moët Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and LVMH Moët
The main advantage of trading using opposite Ford and LVMH Moët positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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.The idea behind Ford Motor 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 Moët vs. SLR Investment Corp | LVMH Moët vs. ECHO INVESTMENT ZY | LVMH Moët vs. Mitsui Chemicals | LVMH Moët vs. Keck Seng Investments |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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