Correlation Between Financiere Moncey and LVMH Mot
Can any of the company-specific risk be diversified away by investing in both Financiere Moncey 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 Financiere Moncey and LVMH Mot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financiere Moncey SA and LVMH Mot Hennessy, you can compare the effects of market volatilities on Financiere Moncey 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 Financiere Moncey with a short position of LVMH Mot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financiere Moncey and LVMH Mot.
Diversification Opportunities for Financiere Moncey and LVMH Mot
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Financiere and LVMH is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Financiere Moncey 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 Financiere Moncey 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 Financiere Moncey 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 Financiere Moncey i.e., Financiere Moncey and LVMH Mot go up and down completely randomly.
Pair Corralation between Financiere Moncey and LVMH Mot
Assuming the 90 days trading horizon Financiere Moncey SA is expected to generate 1.29 times more return on investment than LVMH Mot. However, Financiere Moncey is 1.29 times more volatile than LVMH Mot Hennessy. It trades about 0.19 of its potential returns per unit of risk. LVMH Mot Hennessy is currently generating about 0.04 per unit of risk. If you would invest 12,900 in Financiere Moncey SA on October 17, 2024 and sell it today you would earn a total of 1,002 from holding Financiere Moncey SA or generate 7.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Financiere Moncey SA vs. LVMH Mot Hennessy
Performance |
| Timeline |
| Financiere Moncey |
| LVMH Mot Hennessy |
Financiere Moncey and LVMH Mot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financiere Moncey and LVMH Mot
The main advantage of trading using opposite Financiere Moncey and LVMH Mot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financiere Moncey 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.| Financiere Moncey vs. LVMH Mot Hennessy | Financiere Moncey vs. LOreal SA | Financiere Moncey vs. Hermes International SCA | Financiere Moncey vs. Manitou BF SA |
| 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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