Correlation Between Boa Concept and LVMH Mot

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

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

Diversification Opportunities for Boa Concept and LVMH Mot

0.76

Correlation Coefficient

Boa Concept  LVMH Mot

Poor diversification

The 3 months correlation between Boa and LVMH is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Boa Concept 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 Boa Concept 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 Boa Concept 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 Boa Concept i.e., Boa Concept and LVMH Mot go up and down completely randomly.

Pair Corralation between Boa Concept and LVMH Mot

Assuming the 90 days trading horizon Boa Concept SA is expected to under-perform the LVMH Mot. In addition to that, Boa Concept is 1.84 times more volatile than LVMH Mot Hennessy. It trades about -0.15 of its total potential returns per unit of risk. LVMH Mot Hennessy is currently generating about -0.1 per unit of volatility. If you would invest  69,010  in LVMH Mot Hennessy on December 5, 2024 and sell it today you would lose (2,270) from holding LVMH Mot Hennessy or give up 3.29% of portfolio value over 90 days.

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

Boa Concept SA  vs.  LVMH Mot Hennessy

Boa Concept SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Boa Concept SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Boa Concept reported solid returns over the last few months and may actually be approaching a breakup point.

LVMH Mot Hennessy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LVMH Mot Hennessy are ranked lower than 6 (%) 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 April 2025.

Pair Trading with Boa Concept and LVMH Mot

The main advantage of trading using opposite Boa Concept and LVMH Mot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boa Concept 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 Boa Concept 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.