Correlation Between Safran SA and LVMH Mot
Can any of the company-specific risk be diversified away by investing in both Safran 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 Safran 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 Safran SA and LVMH Mot Hennessy, you can compare the effects of market volatilities on Safran 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 Safran SA with a short position of LVMH Mot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Safran SA and LVMH Mot.
Diversification Opportunities for Safran SA and LVMH Mot
Very good diversification
The 3 months correlation between Safran and LVMH is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Safran 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 Safran 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 Safran 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 Safran SA i.e., Safran SA and LVMH Mot go up and down completely randomly.
Pair Corralation between Safran SA and LVMH Mot
Assuming the 90 days trading horizon Safran SA is expected to generate 0.76 times more return on investment than LVMH Mot. However, Safran SA is 1.32 times less risky than LVMH Mot. It trades about 0.06 of its potential returns per unit of risk. LVMH Mot Hennessy is currently generating about -0.1 per unit of risk. If you would invest 19,175 in Safran SA on August 27, 2024 and sell it today you would earn a total of 2,835 from holding Safran SA or generate 14.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Safran SA vs. LVMH Mot Hennessy
Performance |
| Timeline |
| Safran SA |
| LVMH Mot Hennessy |
Safran SA and LVMH Mot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Safran SA and LVMH Mot
The main advantage of trading using opposite Safran SA and LVMH Mot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Safran 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.| Safran SA vs. Prodways Group SA | Safran SA vs. Claranova SE | Safran SA vs. DBV Technologies SA | Safran SA vs. Manitou BF 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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