Correlation Between DICKS Sporting and LVMH Mot

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

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

Diversification Opportunities for DICKS Sporting and LVMH Mot

0.13

Correlation Coefficient

DICKS Sporting  LVMH Mot

Average diversification

The 3 months correlation between DICKS and LVMH is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding DICKS Sporting Goods 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 DICKS Sporting 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 DICKS Sporting Goods 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 DICKS Sporting i.e., DICKS Sporting and LVMH Mot go up and down completely randomly.

Pair Corralation between DICKS Sporting and LVMH Mot

Assuming the 90 days horizon DICKS Sporting Goods is expected to generate 1.4 times more return on investment than LVMH Mot. However, DICKS Sporting is 1.4 times more volatile than LVMH Mot Hennessy. It trades about 0.07 of its potential returns per unit of risk. LVMH Mot Hennessy is currently generating about -0.03 per unit of risk. If you would invest  18,439  in DICKS Sporting Goods on September 30, 2024 and sell it today you would earn a total of  3,856  from holding DICKS Sporting Goods or generate 20.91% return on investment over 90 days.

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

DICKS Sporting Goods  vs.  LVMH Mot Hennessy

DICKS Sporting Goods

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DICKS Sporting Goods are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DICKS Sporting reported solid returns over the last few months and may actually be approaching a breakup point.

LVMH Mot Hennessy

Risk-Adjusted Performance

0 of 100

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 comparatively stable technical indicators, LVMH Mot is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with DICKS Sporting and LVMH Mot

The main advantage of trading using opposite DICKS Sporting and LVMH Mot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DICKS Sporting 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 DICKS Sporting Goods 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.