Correlation Between Salesforce and LVMH Moët

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

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

Diversification Opportunities for Salesforce and LVMH Moët

0.31

Correlation Coefficient

Salesforce  LVMH Moët

Weak diversification

The 3 months correlation between Salesforce and LVMH is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce 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 Salesforce 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 Salesforce 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 Salesforce i.e., Salesforce and LVMH Moët go up and down completely randomly.

Pair Corralation between Salesforce and LVMH Moët

Considering the 90-day investment horizon Salesforce is expected to under-perform the LVMH Moët. But the stock apears to be less risky and, when comparing its historical volatility, Salesforce is 1.12 times less risky than LVMH Moët. The stock trades about -0.18 of its potential returns per unit of risk. The LVMH Mot Hennessy is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  62,850  in LVMH Mot Hennessy on December 21, 2024 and sell it today you would lose (2,430) from holding LVMH Mot Hennessy or give up 3.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Salesforce  vs.  LVMH Mot Hennessy

Salesforce

Risk-Adjusted Performance

Very Weak

Over the last 90 days Salesforce has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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. In spite of very healthy technical indicators, LVMH Moët is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Salesforce and LVMH Moët

The main advantage of trading using opposite Salesforce and LVMH Moët positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Salesforce 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 Salesforce 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.