Correlation Between LVMH Moet and Swatch Group

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

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

Diversification Opportunities for LVMH Moet and Swatch Group

0.0

Correlation Coefficient

LVMH Moet  Swatch Group

Pay attention - limited upside

The 3 months correlation between LVMH and Swatch is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding LVMH Moet Hennessy and Swatch Group AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swatch Group AG and LVMH Moet 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 LVMH Moet Hennessy are associated (or correlated) with Swatch Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swatch Group AG has no effect on the direction of LVMH Moet i.e., LVMH Moet and Swatch Group go up and down completely randomly.

Pair Corralation between LVMH Moet and Swatch Group

If you would invest (100.00) in LVMH Moet Hennessy on December 29, 2024 and sell it today you would earn a total of  100.00  from holding LVMH Moet Hennessy or generate -100.0% return on investment over 90 days.

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

LVMH Moet Hennessy  vs.  Swatch Group AG

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.

Swatch Group AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days Swatch Group AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Swatch Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with LVMH Moet and Swatch Group

The main advantage of trading using opposite LVMH Moet and Swatch Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LVMH Moet position performs unexpectedly, Swatch Group 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 Swatch Group will offset losses from the drop in Swatch Group's long position.

The idea behind LVMH Moet Hennessy and Swatch Group AG 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.