Correlation Between HITACHI STRMACHADR2 and LVMH Moët

Can any of the company-specific risk be diversified away by investing in both HITACHI STRMACHADR2 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 HITACHI STRMACHADR2 and LVMH Moët into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HITACHI STRMACHADR2 and LVMH Mot Hennessy, you can compare the effects of market volatilities on HITACHI STRMACHADR2 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 HITACHI STRMACHADR2 with a short position of LVMH Moët. Check out your portfolio center. Please also check ongoing floating volatility patterns of HITACHI STRMACHADR2 and LVMH Moët.

Diversification Opportunities for HITACHI STRMACHADR2 and LVMH Moët

0.62

Correlation Coefficient

HITACHI STRMACHADR2  LVMH Moët

Poor diversification

The 3 months correlation between HITACHI and LVMH is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding HITACHI STRMACHADR2 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 HITACHI STRMACHADR2 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 HITACHI STRMACHADR2 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 HITACHI STRMACHADR2 i.e., HITACHI STRMACHADR2 and LVMH Moët go up and down completely randomly.

Pair Corralation between HITACHI STRMACHADR2 and LVMH Moët

Assuming the 90 days trading horizon HITACHI STRMACHADR2 is expected to generate 6.24 times less return on investment than LVMH Moët. But when comparing it to its historical volatility, HITACHI STRMACHADR2 is 1.89 times less risky than LVMH Moët. It trades about 0.04 of its potential returns per unit of risk. LVMH Mot Hennessy is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  11,483  in LVMH Mot Hennessy on September 23, 2024 and sell it today you would earn a total of  817.00  from holding LVMH Mot Hennessy or generate 7.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

HITACHI STRMACHADR2  vs.  LVMH Mot Hennessy

HITACHI STRMACHADR2

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HITACHI STRMACHADR2 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, HITACHI STRMACHADR2 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

LVMH Mot Hennessy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LVMH Mot Hennessy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, LVMH Moët may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with HITACHI STRMACHADR2 and LVMH Moët

The main advantage of trading using opposite HITACHI STRMACHADR2 and LVMH Moët positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HITACHI STRMACHADR2 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.

The idea behind HITACHI STRMACHADR2 and LVMH Mot Hennessy pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.