Correlation Between LVMH Mot and Lectricite

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

Diversification Opportunities for LVMH Mot and Lectricite

-0.45

Correlation Coefficient

LVMH Mot  Lectricite

Very good diversification

The 3 months correlation between LVMH and Lectricite is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding LVMH Mot Hennessy and lectricite de Strasbourg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on lectricite de Strasbourg 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 Lectricite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of lectricite de Strasbourg has no effect on the direction of LVMH Mot i.e., LVMH Mot and Lectricite go up and down completely randomly.

Pair Corralation between LVMH Mot and Lectricite

Assuming the 90 days horizon LVMH Mot Hennessy is expected to under-perform the Lectricite. In addition to that, LVMH Mot is 2.77 times more volatile than lectricite de Strasbourg. It trades about -0.08 of its total potential returns per unit of risk. lectricite de Strasbourg is currently generating about 0.05 per unit of volatility. If you would invest  10,800  in lectricite de Strasbourg on September 1, 2024 and sell it today you would earn a total of  250.00  from holding lectricite de Strasbourg or generate 2.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.48%
Values	Daily Returns

LVMH Mot Hennessy  vs.  lectricite de Strasbourg

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.

lectricite de Strasbourg

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in lectricite de Strasbourg are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Lectricite 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 Mot and Lectricite

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

The idea behind LVMH Mot Hennessy and lectricite de Strasbourg 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 Transaction History module to view history of all your transactions and understand their impact on performance.