Correlation Between LVMH Mot and Airbus Group

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

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

Diversification Opportunities for LVMH Mot and Airbus Group

-0.32

Correlation Coefficient

LVMH Mot  Airbus Group

Very good diversification

The 3 months correlation between LVMH and Airbus is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding LVMH Mot Hennessy and Airbus Group SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airbus Group SE and LVMH Mot 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 LVMH Mot Hennessy are associated (or correlated) with Airbus Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airbus Group SE has no effect on the direction of LVMH Mot i.e., LVMH Mot and Airbus Group go up and down completely randomly.

Pair Corralation between LVMH Mot and Airbus Group

Assuming the 90 days horizon LVMH Mot Hennessy is expected to under-perform the Airbus Group. In addition to that, LVMH Mot is 1.58 times more volatile than Airbus Group SE. It trades about -0.08 of its total potential returns per unit of risk. Airbus Group SE is currently generating about 0.01 per unit of volatility. If you would invest  13,882  in Airbus Group SE on August 30, 2024 and sell it today you would earn a total of  56.00  from holding Airbus Group SE or generate 0.4% return on investment over 90 days.

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

LVMH Mot Hennessy  vs.  Airbus Group SE

LVMH Mot Hennessy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LVMH Mot Hennessy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Airbus Group SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Airbus Group SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Airbus Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with LVMH Mot and Airbus Group

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

The idea behind LVMH Mot Hennessy and Airbus Group SE 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.