Correlation Between Kering SA and LVMH Mot
Can any of the company-specific risk be diversified away by investing in both Kering SA 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 Kering SA and LVMH Mot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kering SA and LVMH Mot Hennessy, you can compare the effects of market volatilities on Kering SA 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 Kering SA with a short position of LVMH Mot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kering SA and LVMH Mot.
Diversification Opportunities for Kering SA and LVMH Mot
Almost no diversification
The 3 months correlation between Kering and LVMH is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Kering 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 Kering SA 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 Kering 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 Kering SA i.e., Kering SA and LVMH Mot go up and down completely randomly.
Pair Corralation between Kering SA and LVMH Mot
Assuming the 90 days trading horizon Kering SA is expected to under-perform the LVMH Mot. In addition to that, Kering SA is 1.74 times more volatile than LVMH Mot Hennessy. It trades about -0.22 of its total potential returns per unit of risk. LVMH Mot Hennessy is currently generating about -0.23 per unit of volatility. If you would invest 63,210 in LVMH Mot Hennessy on August 27, 2024 and sell it today you would lose (4,910) from holding LVMH Mot Hennessy or give up 7.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kering SA vs. LVMH Mot Hennessy
Performance |
| Timeline |
| Kering SA |
| LVMH Mot Hennessy |
Kering SA and LVMH Mot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kering SA and LVMH Mot
The main advantage of trading using opposite Kering SA and LVMH Mot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kering SA 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.| Kering SA vs. Hermes International SCA | Kering SA vs. LVMH Mot Hennessy | Kering SA vs. LOreal SA | Kering SA vs. Pernod Ricard 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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