Correlation Between LVMH Mot and Malteries Franco

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

Diversification Opportunities for LVMH Mot and Malteries Franco

-0.47

Correlation Coefficient

LVMH Mot  Malteries Franco

Very good diversification

The 3 months correlation between LVMH and Malteries is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding LVMH Mot Hennessy and Malteries Franco Belges Socit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malteries Franco Belges 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 Malteries Franco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Malteries Franco Belges has no effect on the direction of LVMH Mot i.e., LVMH Mot and Malteries Franco go up and down completely randomly.

Pair Corralation between LVMH Mot and Malteries Franco

Assuming the 90 days horizon LVMH Mot is expected to generate 1.45 times less return on investment than Malteries Franco. In addition to that, LVMH Mot is 1.63 times more volatile than Malteries Franco Belges Socit. It trades about 0.06 of its total potential returns per unit of risk. Malteries Franco Belges Socit is currently generating about 0.15 per unit of volatility. If you would invest  65,000  in Malteries Franco Belges Socit on September 14, 2024 and sell it today you would earn a total of  9,000  from holding Malteries Franco Belges Socit or generate 13.85% return on investment over 90 days.

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

LVMH Mot Hennessy  vs.  Malteries Franco Belges Socit

LVMH Mot Hennessy

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in LVMH Mot Hennessy are ranked lower than 5 (%) 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.

Malteries Franco Belges

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Malteries Franco Belges Socit are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Malteries Franco sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LVMH Mot and Malteries Franco

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

The idea behind LVMH Mot Hennessy and Malteries Franco Belges Socit 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.