Correlation Between Financiere Moncey and LVMH Mot

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

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

Diversification Opportunities for Financiere Moncey and LVMH Mot

0.13

Correlation Coefficient

Financiere Moncey  LVMH Mot

Average diversification

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

Pair Corralation between Financiere Moncey and LVMH Mot

Assuming the 90 days trading horizon Financiere Moncey is expected to generate 1.06 times less return on investment than LVMH Mot. But when comparing it to its historical volatility, Financiere Moncey SA is 1.43 times less risky than LVMH Mot. It trades about 0.44 of its potential returns per unit of risk. LVMH Mot Hennessy is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  57,194  in LVMH Mot Hennessy on September 20, 2024 and sell it today you would earn a total of  6,456  from holding LVMH Mot Hennessy or generate 11.29% return on investment over 90 days.

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

Financiere Moncey SA  vs.  LVMH Mot Hennessy

Financiere Moncey

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Financiere Moncey SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Financiere Moncey may actually be approaching a critical reversion point that can send shares even higher in January 2025.

LVMH Mot Hennessy

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LVMH Mot Hennessy are ranked lower than 5 (%) 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 Financiere Moncey and LVMH Mot

The main advantage of trading using opposite Financiere Moncey and LVMH Mot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financiere Moncey 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 Financiere Moncey 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.