Correlation Between LVMH Mot and Pernod Ricard
Can any of the company-specific risk be diversified away by investing in both LVMH Mot and Pernod Ricard 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 Mot and Pernod Ricard 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 Pernod Ricard SA, you can compare the effects of market volatilities on LVMH Mot and Pernod Ricard 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 Mot with a short position of Pernod Ricard. Check out your portfolio center. Please also check ongoing floating volatility patterns of LVMH Mot and Pernod Ricard.
Diversification Opportunities for LVMH Mot and Pernod Ricard
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between LVMH and Pernod is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding LVMH Mot Hennessy and Pernod Ricard SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pernod Ricard SA and LVMH Mot 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 Pernod Ricard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pernod Ricard SA has no effect on the direction of LVMH Mot i.e., LVMH Mot and Pernod Ricard go up and down completely randomly.
Pair Corralation between LVMH Mot and Pernod Ricard
Assuming the 90 days horizon LVMH Mot Hennessy is expected to generate 1.15 times more return on investment than Pernod Ricard. However, LVMH Mot is 1.15 times more volatile than Pernod Ricard SA. It trades about 0.17 of its potential returns per unit of risk. Pernod Ricard SA is currently generating about -0.06 per unit of risk. If you would invest 58,314 in LVMH Mot Hennessy on November 18, 2024 and sell it today you would earn a total of 12,986 from holding LVMH Mot Hennessy or generate 22.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LVMH Mot Hennessy vs. Pernod Ricard SA
Performance |
| Timeline |
| LVMH Mot Hennessy |
| Pernod Ricard SA |
LVMH Mot and Pernod Ricard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LVMH Mot and Pernod Ricard
The main advantage of trading using opposite LVMH Mot and Pernod Ricard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LVMH Mot position performs unexpectedly, Pernod Ricard 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 Pernod Ricard will offset losses from the drop in Pernod Ricard's long position.| LVMH Mot vs. Kering SA | LVMH Mot vs. Hermes International SCA | LVMH Mot vs. LOreal SA | LVMH Mot vs. Air Liquide SA |
| Pernod Ricard vs. LOreal SA | Pernod Ricard vs. Danone SA | Pernod Ricard vs. Compagnie Generale des | Pernod Ricard 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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