Correlation Between Compagnie Financière and LVMH Moet

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

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

Diversification Opportunities for Compagnie Financière and LVMH Moet

0.0

Correlation Coefficient

Compagnie Financière  LVMH Moet

Pay attention - limited upside

The 3 months correlation between Compagnie and LVMH is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie Financire Richemont 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 Compagnie Financière 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 Compagnie Financire Richemont 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 Compagnie Financière i.e., Compagnie Financière and LVMH Moet go up and down completely randomly.

Pair Corralation between Compagnie Financière and LVMH Moet

If you would invest  13,876  in Compagnie Financire Richemont on November 28, 2024 and sell it today you would earn a total of  6,224  from holding Compagnie Financire Richemont or generate 44.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Compagnie Financire Richemont  vs.  LVMH Moet Hennessy

Compagnie Financière

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Financire Richemont are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical indicators, Compagnie Financière reported solid returns over the last few months and may actually be approaching a breakup point.

LVMH Moet Hennessy

Risk-Adjusted Performance

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 Compagnie Financière and LVMH Moet

The main advantage of trading using opposite Compagnie Financière and LVMH Moet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compagnie Financière 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 Compagnie Financire Richemont 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.