Correlation Between LVMH Moët and Prada SpA
Can any of the company-specific risk be diversified away by investing in both LVMH Moët and Prada SpA 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 LVMH Moët and Prada SpA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LVMH Mot Hennessy and Prada SpA, you can compare the effects of market volatilities on LVMH Moët and Prada SpA 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 LVMH Moët with a short position of Prada SpA. Check out your portfolio center. Please also check ongoing floating volatility patterns of LVMH Moët and Prada SpA.
Diversification Opportunities for LVMH Moët and Prada SpA
Good diversification
The 3 months correlation between LVMH and Prada is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding LVMH Mot Hennessy and Prada SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prada SpA and LVMH Moët 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 LVMH Mot Hennessy are associated (or correlated) with Prada SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prada SpA has no effect on the direction of LVMH Moët i.e., LVMH Moët and Prada SpA go up and down completely randomly.
Pair Corralation between LVMH Moët and Prada SpA
Assuming the 90 days horizon LVMH Mot Hennessy is expected to under-perform the Prada SpA. But the pink sheet apears to be less risky and, when comparing its historical volatility, LVMH Mot Hennessy is 1.66 times less risky than Prada SpA. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Prada SpA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 671.00 in Prada SpA on August 31, 2024 and sell it today you would earn a total of 21.00 from holding Prada SpA or generate 3.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.99% |
| Values | Daily Returns |
LVMH Mot Hennessy vs. Prada SpA
Performance |
| Timeline |
| LVMH Mot Hennessy |
| Prada SpA |
LVMH Moët and Prada SpA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LVMH Moët and Prada SpA
The main advantage of trading using opposite LVMH Moët and Prada SpA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LVMH Moët position performs unexpectedly, Prada SpA 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 Prada SpA will offset losses from the drop in Prada SpA's long position.| LVMH Moët vs. Hermes International SA | LVMH Moët vs. Kering SA | LVMH Moët vs. Capri Holdings | LVMH Moët vs. Tapestry |
| Prada SpA vs. Lanvin Group Holdings | Prada SpA vs. MYT Netherlands Parent | Prada SpA vs. Movado Group | Prada SpA vs. Birks Group |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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