Correlation Between LVMH Mot and Munic SA

Can any of the company-specific risk be diversified away by investing in both LVMH Mot and Munic SA 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 Munic SA 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 Munic SA, you can compare the effects of market volatilities on LVMH Mot and Munic SA 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 Munic SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of LVMH Mot and Munic SA.

Diversification Opportunities for LVMH Mot and Munic SA

-0.47

Correlation Coefficient

LVMH Mot  Munic SA

Very good diversification

The 3 months correlation between LVMH and Munic is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding LVMH Mot Hennessy and Munic SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Munic 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 Munic SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Munic SA has no effect on the direction of LVMH Mot i.e., LVMH Mot and Munic SA go up and down completely randomly.

Pair Corralation between LVMH Mot and Munic SA

Assuming the 90 days horizon LVMH Mot Hennessy is expected to generate 0.48 times more return on investment than Munic SA. However, LVMH Mot Hennessy is 2.1 times less risky than Munic SA. It trades about 0.04 of its potential returns per unit of risk. Munic SA is currently generating about -0.17 per unit of risk. If you would invest  63,120  in LVMH Mot Hennessy on October 17, 2024 and sell it today you would earn a total of  600.00  from holding LVMH Mot Hennessy or generate 0.95% return on investment over 90 days.

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

LVMH Mot Hennessy  vs.  Munic SA

LVMH Mot Hennessy

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in LVMH Mot Hennessy are ranked lower than 6 (%) 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 February 2025.

Munic SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Munic SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Munic SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LVMH Mot and Munic SA

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

The idea behind LVMH Mot Hennessy and Munic 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.

Check out your portfolio center.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.