Correlation Between Vivendi SA and LVMH Mot

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

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

Diversification Opportunities for Vivendi SA and LVMH Mot

0.49

Correlation Coefficient

Vivendi SA  LVMH Mot

Very weak diversification

The 3 months correlation between Vivendi and LVMH is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Vivendi SA and LVMH Mot Hennessy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LVMH Mot Hennessy and Vivendi SA 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 Vivendi SA are associated (or correlated) with LVMH Mot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LVMH Mot Hennessy has no effect on the direction of Vivendi SA i.e., Vivendi SA and LVMH Mot go up and down completely randomly.

Pair Corralation between Vivendi SA and LVMH Mot

Assuming the 90 days trading horizon Vivendi SA is expected to under-perform the LVMH Mot. But the stock apears to be less risky and, when comparing its historical volatility, Vivendi SA is 1.06 times less risky than LVMH Mot. The stock trades about -0.13 of its potential returns per unit of risk. The LVMH Mot Hennessy is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  56,709  in LVMH Mot Hennessy on September 13, 2024 and sell it today you would earn a total of  7,671  from holding LVMH Mot Hennessy or generate 13.53% return on investment over 90 days.

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

Vivendi SA  vs.  LVMH Mot Hennessy

Vivendi SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vivendi 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.

LVMH Mot Hennessy

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LVMH Mot Hennessy are ranked lower than 4 (%) 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.

Pair Trading with Vivendi SA and LVMH Mot

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

The idea behind Vivendi SA and LVMH Mot 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.