Correlation Between LVMH Mot and Grolleau SAS

Can any of the company-specific risk be diversified away by investing in both LVMH Mot and Grolleau SAS 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 Grolleau SAS 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 Grolleau SAS, you can compare the effects of market volatilities on LVMH Mot and Grolleau SAS 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 Grolleau SAS. Check out your portfolio center. Please also check ongoing floating volatility patterns of LVMH Mot and Grolleau SAS.

Diversification Opportunities for LVMH Mot and Grolleau SAS

0.1

Correlation Coefficient

LVMH Mot  Grolleau SAS

Average diversification

The 3 months correlation between LVMH and Grolleau is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding LVMH Mot Hennessy and Grolleau SAS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grolleau SAS 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 Grolleau SAS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grolleau SAS has no effect on the direction of LVMH Mot i.e., LVMH Mot and Grolleau SAS go up and down completely randomly.

Pair Corralation between LVMH Mot and Grolleau SAS

Assuming the 90 days horizon LVMH Mot Hennessy is expected to generate 0.7 times more return on investment than Grolleau SAS. However, LVMH Mot Hennessy is 1.43 times less risky than Grolleau SAS. It trades about 0.05 of its potential returns per unit of risk. Grolleau SAS is currently generating about -0.05 per unit of risk. If you would invest  60,117  in LVMH Mot Hennessy on September 12, 2024 and sell it today you would earn a total of  3,483  from holding LVMH Mot Hennessy or generate 5.79% return on investment over 90 days.

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

LVMH Mot Hennessy  vs.  Grolleau SAS

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 somewhat weak basic indicators, LVMH Mot may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Grolleau SAS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grolleau SAS has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with LVMH Mot and Grolleau SAS

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

The idea behind LVMH Mot Hennessy and Grolleau SAS 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.