Correlation Between Prada Spa and LVMH Moet

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

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

Diversification Opportunities for Prada Spa and LVMH Moet

0.55

Correlation Coefficient

Prada Spa  LVMH Moet

Very weak diversification

The 3 months correlation between Prada and LVMH is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Prada Spa PK and LVMH Moet Hennessy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LVMH Moet Hennessy and Prada Spa 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 Prada Spa PK are associated (or correlated) with LVMH Moet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LVMH Moet Hennessy has no effect on the direction of Prada Spa i.e., Prada Spa and LVMH Moet go up and down completely randomly.

Pair Corralation between Prada Spa and LVMH Moet

If you would invest  17,195  in LVMH Moet Hennessy on August 30, 2024 and sell it today you would earn a total of  0.00  from holding LVMH Moet Hennessy or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.59%
Values	Daily Returns

Prada Spa PK  vs.  LVMH Moet Hennessy

Prada Spa PK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prada Spa PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Prada Spa is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

LVMH Moet Hennessy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LVMH Moet Hennessy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, LVMH Moet is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Prada Spa and LVMH Moet

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

The idea behind Prada Spa PK and LVMH Moet Hennessy 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.