Correlation Between Compagnie Financière and LVMH Moët
Can any of the company-specific risk be diversified away by investing in both Compagnie Financière 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 Compagnie Financière and LVMH Moët into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compagnie Financire Richemont and LVMH Mot Hennessy, you can compare the effects of market volatilities on Compagnie Financière 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 Compagnie Financière with a short position of LVMH Moët. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compagnie Financière and LVMH Moët.
Diversification Opportunities for Compagnie Financière and LVMH Moët
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Compagnie and LVMH is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie Financire Richemont 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 Compagnie Financière 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 Compagnie Financire Richemont 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 Compagnie Financière i.e., Compagnie Financière and LVMH Moët go up and down completely randomly.
Pair Corralation between Compagnie Financière and LVMH Moët
Assuming the 90 days trading horizon Compagnie Financire Richemont is expected to generate 1.62 times more return on investment than LVMH Moët. However, Compagnie Financière is 1.62 times more volatile than LVMH Mot Hennessy. It trades about 0.02 of its potential returns per unit of risk. LVMH Mot Hennessy is currently generating about -0.02 per unit of risk. If you would invest 1,306 in Compagnie Financire Richemont on October 14, 2024 and sell it today you would earn a total of 184.00 from holding Compagnie Financire Richemont or generate 14.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Compagnie Financire Richemont vs. LVMH Mot Hennessy
Performance |
| Timeline |
| Compagnie Financière |
| LVMH Mot Hennessy |
Compagnie Financière and LVMH Moët Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compagnie Financière and LVMH Moët
The main advantage of trading using opposite Compagnie Financière and LVMH Moët positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compagnie Financière 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.| Compagnie Financière vs. SINGAPORE AIRLINES | Compagnie Financière vs. Guidewire Software | Compagnie Financière vs. Magic Software Enterprises | Compagnie Financière vs. United Airlines Holdings |
| LVMH Moët vs. Dentsply Sirona | LVMH Moët vs. SAFEROADS HLDGS | LVMH Moët vs. NAGOYA RAILROAD | LVMH Moët vs. Texas Roadhouse |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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