Correlation Between LVMH Mot and Mercialys

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

Diversification Opportunities for LVMH Mot and Mercialys

0.41

Correlation Coefficient

LVMH Mot  Mercialys

Very weak diversification

The 3 months correlation between LVMH and Mercialys is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding LVMH Mot Hennessy and Mercialys SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercialys SA 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 Mercialys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercialys SA has no effect on the direction of LVMH Mot i.e., LVMH Mot and Mercialys go up and down completely randomly.

Pair Corralation between LVMH Mot and Mercialys

Assuming the 90 days horizon LVMH Mot Hennessy is expected to generate 1.33 times more return on investment than Mercialys. However, LVMH Mot is 1.33 times more volatile than Mercialys SA. It trades about 0.26 of its potential returns per unit of risk. Mercialys SA is currently generating about -0.14 per unit of risk. If you would invest  58,700  in LVMH Mot Hennessy on September 30, 2024 and sell it today you would earn a total of  4,860  from holding LVMH Mot Hennessy or generate 8.28% return on investment over 90 days.

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

LVMH Mot Hennessy  vs.  Mercialys SA

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 somewhat strong basic indicators, LVMH Mot is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mercialys SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mercialys SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with LVMH Mot and Mercialys

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

The idea behind LVMH Mot Hennessy and Mercialys SA 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.