Correlation Between Hermès International and LVMH Moët
Can any of the company-specific risk be diversified away by investing in both Hermès International 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 Hermès International and LVMH Moët 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 Hermès International 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 Hermès International with a short position of LVMH Moët. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hermès International and LVMH Moët.
Diversification Opportunities for Hermès International and LVMH Moët
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hermès and LVMH is 0.72. 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 Hermès 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 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 Hermès International i.e., Hermès International and LVMH Moët go up and down completely randomly.
Pair Corralation between Hermès International and LVMH Moët
Assuming the 90 days horizon Herms International Socit is expected to generate 0.99 times more return on investment than LVMH Moët. However, Herms International Socit is 1.01 times less risky than LVMH Moët. It trades about 0.05 of its potential returns per unit of risk. LVMH Mot Hennessy is currently generating about -0.01 per unit of risk. If you would invest 162,904 in Herms International Socit on October 14, 2024 and sell it today you would earn a total of 74,396 from holding Herms International Socit or generate 45.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Herms International Socit vs. LVMH Mot Hennessy
Performance |
| Timeline |
| Herms International Socit |
| LVMH Mot Hennessy |
Hermès International and LVMH Moët Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hermès International and LVMH Moët
The main advantage of trading using opposite Hermès International and LVMH Moët positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hermès International 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.| Hermès International vs. RELIANCE STEEL AL | Hermès International vs. 24SEVENOFFICE GROUP AB | Hermès International vs. KENEDIX OFFICE INV | Hermès International vs. Nippon Steel |
| LVMH Moët vs. LVMH Mot Hennessy | LVMH Moët vs. LVMH Mot Hennessy | LVMH Moët vs. Herms International Socit | LVMH Moët vs. CHRISTIAN DIOR ADR14EO2 |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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