Correlation Between Herms International and LVMH Mot
Can any of the company-specific risk be diversified away by investing in both Herms International 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 Herms International and LVMH Mot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Herms International Socit and LVMH Mot Hennessy, you can compare the effects of market volatilities on Herms International 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 Herms International with a short position of LVMH Mot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Herms International and LVMH Mot.
Diversification Opportunities for Herms International and LVMH Mot
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Herms and LVMH is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Herms International Socit 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 Herms International 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 Herms International Socit 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 Herms International i.e., Herms International and LVMH Mot go up and down completely randomly.
Pair Corralation between Herms International and LVMH Mot
Assuming the 90 days horizon Herms International Socit is expected to generate 1.09 times more return on investment than LVMH Mot. However, Herms International is 1.09 times more volatile than LVMH Mot Hennessy. It trades about 0.04 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 214,400 in Herms International Socit on September 26, 2024 and sell it today you would earn a total of 16,900 from holding Herms International Socit or generate 7.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Herms International Socit vs. LVMH Mot Hennessy
Performance |
| Timeline |
| Herms International Socit |
| LVMH Mot Hennessy |
Herms International and LVMH Mot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Herms International and LVMH Mot
The main advantage of trading using opposite Herms International and LVMH Mot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Herms International 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.| Herms International vs. LVMH Mot Hennessy | Herms International vs. CHRISTIAN DIOR ADR14EO2 | Herms International vs. Christian Dior SE | Herms International vs. The Swatch Group |
| LVMH Mot vs. LVMH Mot Hennessy | LVMH Mot vs. Herms International Socit | LVMH Mot vs. CHRISTIAN DIOR ADR14EO2 | LVMH Mot vs. Christian Dior SE |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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