Correlation Between BNP Paribas and LVMH Mot

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

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

Diversification Opportunities for BNP Paribas and LVMH Mot

0.22

Correlation Coefficient

BNP Paribas  LVMH Mot

Modest diversification

The 3 months correlation between BNP and LVMH is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding BNP Paribas 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 BNP Paribas 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 BNP Paribas 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 BNP Paribas i.e., BNP Paribas and LVMH Mot go up and down completely randomly.

Pair Corralation between BNP Paribas and LVMH Mot

Assuming the 90 days trading horizon BNP Paribas SA is expected to generate 0.71 times more return on investment than LVMH Mot. However, BNP Paribas SA is 1.4 times less risky than LVMH Mot. It trades about -0.02 of its potential returns per unit of risk. LVMH Mot Hennessy is currently generating about -0.05 per unit of risk. If you would invest  6,056  in BNP Paribas SA on September 23, 2024 and sell it today you would lose (308.00) from holding BNP Paribas SA or give up 5.09% of portfolio value over 90 days.

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

BNP Paribas SA  vs.  LVMH Mot Hennessy

BNP Paribas SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BNP Paribas SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains 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 BNP Paribas and LVMH Mot

The main advantage of trading using opposite BNP Paribas and LVMH Mot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BNP Paribas 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 BNP Paribas 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..