Correlation Between NEW MILLENNIUM and LVMH Moët

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

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

Diversification Opportunities for NEW MILLENNIUM and LVMH Moët

-0.25

Correlation Coefficient

NEW MILLENNIUM  LVMH Moët

Very good diversification

The 3 months correlation between NEW and LVMH is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding NEW MILLENNIUM IRON 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 NEW MILLENNIUM 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 NEW MILLENNIUM IRON are associated (or correlated) with LVMH Moët. 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 NEW MILLENNIUM i.e., NEW MILLENNIUM and LVMH Moët go up and down completely randomly.

Pair Corralation between NEW MILLENNIUM and LVMH Moët

Assuming the 90 days trading horizon NEW MILLENNIUM IRON is expected to under-perform the LVMH Moët. In addition to that, NEW MILLENNIUM is 1.12 times more volatile than LVMH Mot Hennessy. It trades about -0.08 of its total potential returns per unit of risk. LVMH Mot Hennessy is currently generating about -0.01 per unit of volatility. If you would invest  63,040  in LVMH Mot Hennessy on December 18, 2024 and sell it today you would lose (1,630) from holding LVMH Mot Hennessy or give up 2.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

NEW MILLENNIUM IRON  vs.  LVMH Mot Hennessy

NEW MILLENNIUM IRON

Risk-Adjusted Performance

Very Weak

Over the last 90 days NEW MILLENNIUM IRON has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

LVMH Mot Hennessy

Risk-Adjusted Performance

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 nearly stable basic indicators, LVMH Moët is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NEW MILLENNIUM and LVMH Moët

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

The idea behind NEW MILLENNIUM IRON 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.