Correlation Between Mount Gibson and LVMH Mot

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

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

Diversification Opportunities for Mount Gibson and LVMH Mot

0.11

Correlation Coefficient

Mount Gibson  LVMH Mot

Average diversification

The 3 months correlation between Mount and LVMH is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Mount Gibson Iron 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 Mount Gibson 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 Mount Gibson Iron 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 Mount Gibson i.e., Mount Gibson and LVMH Mot go up and down completely randomly.

Pair Corralation between Mount Gibson and LVMH Mot

Assuming the 90 days horizon Mount Gibson is expected to generate 2.28 times less return on investment than LVMH Mot. In addition to that, Mount Gibson is 2.13 times more volatile than LVMH Mot Hennessy. It trades about 0.05 of its total potential returns per unit of risk. LVMH Mot Hennessy is currently generating about 0.25 per unit of volatility. If you would invest  59,190  in LVMH Mot Hennessy on October 26, 2024 and sell it today you would earn a total of  12,940  from holding LVMH Mot Hennessy or generate 21.86% return on investment over 90 days.

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

Mount Gibson Iron  vs.  LVMH Mot Hennessy

Mount Gibson Iron

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mount Gibson Iron are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Mount Gibson may actually be approaching a critical reversion point that can send shares even higher in February 2025.

LVMH Mot Hennessy

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Mount Gibson and LVMH Mot

The main advantage of trading using opposite Mount Gibson and LVMH Mot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mount Gibson 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 Mount Gibson Iron 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.