Correlation Between Visa and LVMH Moët
Can any of the company-specific risk be diversified away by investing in both Visa 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 Visa and LVMH Moët into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and LVMH Mot Hennessy, you can compare the effects of market volatilities on Visa 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 Visa with a short position of LVMH Moët. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and LVMH Moët.
Diversification Opportunities for Visa and LVMH Moët
Very good diversification
The 3 months correlation between Visa and LVMH is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A 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 Visa 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 Visa Class A 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 Visa i.e., Visa and LVMH Moët go up and down completely randomly.
Pair Corralation between Visa and LVMH Moët
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.5 times more return on investment than LVMH Moët. However, Visa Class A is 2.0 times less risky than LVMH Moët. It trades about 0.26 of its potential returns per unit of risk. LVMH Mot Hennessy is currently generating about 0.01 per unit of risk. If you would invest 28,365 in Visa Class A on September 26, 2024 and sell it today you would earn a total of 3,700 from holding Visa Class A or generate 13.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 97.62% |
| Values | Daily Returns |
Visa Class A vs. LVMH Mot Hennessy
Performance |
| Timeline |
| Visa Class A |
| LVMH Mot Hennessy |
Visa and LVMH Moët Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and LVMH Moët
The main advantage of trading using opposite Visa and LVMH Moët positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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.| Visa vs. American Express | Visa vs. Upstart Holdings | Visa vs. Capital One Financial | Visa vs. Ally Financial |
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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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