Correlation Between LVMH Mot and OPmobility

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

Diversification Opportunities for LVMH Mot and OPmobility

0.28

Correlation Coefficient

LVMH Mot  OPmobility

Modest diversification

The 3 months correlation between LVMH and OPmobility is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding LVMH Mot Hennessy and OPmobility SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OPmobility 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 OPmobility. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OPmobility SE has no effect on the direction of LVMH Mot i.e., LVMH Mot and OPmobility go up and down completely randomly.

Pair Corralation between LVMH Mot and OPmobility

Assuming the 90 days horizon LVMH Mot Hennessy is expected to generate 0.65 times more return on investment than OPmobility. However, LVMH Mot Hennessy is 1.55 times less risky than OPmobility. It trades about -0.01 of its potential returns per unit of risk. OPmobility SE is currently generating about -0.03 per unit of risk. If you would invest  69,608  in LVMH Mot Hennessy on September 26, 2024 and sell it today you would lose (6,528) from holding LVMH Mot Hennessy or give up 9.38% of portfolio value over 90 days.

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

LVMH Mot Hennessy  vs.  OPmobility 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 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.

OPmobility SE

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in OPmobility SE are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, OPmobility sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LVMH Mot and OPmobility

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

The idea behind LVMH Mot Hennessy and OPmobility 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.

Check out your portfolio center.

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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.