Correlation Between LVMH Mot and Maat Pharma

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

Diversification Opportunities for LVMH Mot and Maat Pharma

-0.22

Correlation Coefficient

LVMH Mot  Maat Pharma

Very good diversification

The 3 months correlation between LVMH and Maat is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding LVMH Mot Hennessy and Maat Pharma SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maat Pharma 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 Maat Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maat Pharma SA has no effect on the direction of LVMH Mot i.e., LVMH Mot and Maat Pharma go up and down completely randomly.

Pair Corralation between LVMH Mot and Maat Pharma

Assuming the 90 days horizon LVMH Mot Hennessy is expected to generate 1.03 times more return on investment than Maat Pharma. However, LVMH Mot is 1.03 times more volatile than Maat Pharma SA. It trades about 0.29 of its potential returns per unit of risk. Maat Pharma SA is currently generating about -0.01 per unit of risk. If you would invest  56,956  in LVMH Mot Hennessy on September 22, 2024 and sell it today you would earn a total of  5,854  from holding LVMH Mot Hennessy or generate 10.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

LVMH Mot Hennessy  vs.  Maat Pharma SA

LVMH Mot Hennessy

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LVMH Mot Hennessy are ranked lower than 4 (%) 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 January 2025.

Maat Pharma SA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Maat Pharma SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Maat Pharma may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with LVMH Mot and Maat Pharma

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

The idea behind LVMH Mot Hennessy and Maat Pharma 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.