Correlation Between Levi Strauss and H M

Can any of the company-specific risk be diversified away by investing in both Levi Strauss and H M 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 Levi Strauss and H M into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Levi Strauss Co and H M Hennes, you can compare the effects of market volatilities on Levi Strauss and H M 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 Levi Strauss with a short position of H M. Check out your portfolio center. Please also check ongoing floating volatility patterns of Levi Strauss and H M.

Diversification Opportunities for Levi Strauss and H M

-0.25

Correlation Coefficient

Levi Strauss  H M

Very good diversification

The 3 months correlation between Levi and HMSB is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Levi Strauss Co and H M Hennes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H M Hennes and Levi Strauss 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 Levi Strauss Co are associated (or correlated) with H M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H M Hennes has no effect on the direction of Levi Strauss i.e., Levi Strauss and H M go up and down completely randomly.

Pair Corralation between Levi Strauss and H M

Assuming the 90 days trading horizon Levi Strauss Co is expected to under-perform the H M. But the stock apears to be less risky and, when comparing its historical volatility, Levi Strauss Co is 1.49 times less risky than H M. The stock trades about -0.06 of its potential returns per unit of risk. The H M Hennes is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,303  in H M Hennes on September 22, 2024 and sell it today you would lose (8.00) from holding H M Hennes or give up 0.61% of portfolio value over 90 days.

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

Levi Strauss Co  vs.  H M Hennes

Levi Strauss

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Levi Strauss Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

H M Hennes

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in H M Hennes are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, H M is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Levi Strauss and H M

The main advantage of trading using opposite Levi Strauss and H M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Levi Strauss position performs unexpectedly, H M 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 H M will offset losses from the drop in H M's long position.

The idea behind Levi Strauss Co and H M Hennes 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.