Correlation Between LVMH Mot and Groupimo

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

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

Diversification Opportunities for LVMH Mot and Groupimo

-0.61

Correlation Coefficient

LVMH Mot  Groupimo

Excellent diversification

The 3 months correlation between LVMH and Groupimo is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding LVMH Mot Hennessy and Groupimo SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Groupimo SA and LVMH Mot 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 Mot Hennessy are associated (or correlated) with Groupimo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Groupimo SA has no effect on the direction of LVMH Mot i.e., LVMH Mot and Groupimo go up and down completely randomly.

Pair Corralation between LVMH Mot and Groupimo

Assuming the 90 days horizon LVMH Mot Hennessy is expected to generate 0.24 times more return on investment than Groupimo. However, LVMH Mot Hennessy is 4.13 times less risky than Groupimo. It trades about 0.2 of its potential returns per unit of risk. Groupimo SA is currently generating about -0.21 per unit of risk. If you would invest  59,047  in LVMH Mot Hennessy on September 27, 2024 and sell it today you would earn a total of  4,033  from holding LVMH Mot Hennessy or generate 6.83% return on investment over 90 days.

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

LVMH Mot Hennessy  vs.  Groupimo SA

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. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Groupimo SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Groupimo SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Groupimo reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LVMH Mot and Groupimo

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

The idea behind LVMH Mot Hennessy and Groupimo SA 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.