Correlation Between GM and LVMH Mot
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and LVMH Mot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and LVMH Mot Hennessy, you can compare the effects of market volatilities on GM 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 GM with a short position of LVMH Mot. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and LVMH Mot.
Diversification Opportunities for GM and LVMH Mot
Excellent diversification
The 3 months correlation between GM and LVMH is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding General Motors 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 GM 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 General Motors 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 GM i.e., GM and LVMH Mot go up and down completely randomly.
Pair Corralation between GM and LVMH Mot
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the LVMH Mot. In addition to that, GM is 1.42 times more volatile than LVMH Mot Hennessy. It trades about -0.12 of its total potential returns per unit of risk. LVMH Mot Hennessy is currently generating about 0.04 per unit of volatility. If you would invest 12,600 in LVMH Mot Hennessy on October 15, 2024 and sell it today you would earn a total of 100.00 from holding LVMH Mot Hennessy or generate 0.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 88.89% |
| Values | Daily Returns |
General Motors vs. LVMH Mot Hennessy
Performance |
| Timeline |
| General Motors |
| LVMH Mot Hennessy |
GM and LVMH Mot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and LVMH Mot
The main advantage of trading using opposite GM and LVMH Mot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors 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. MINCO SILVER | LVMH Mot vs. ANGLO ASIAN MINING | LVMH Mot vs. United Natural Foods | LVMH Mot vs. Tyson Foods |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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