Correlation Between LVMH Mot and NRJ

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

Diversification Opportunities for LVMH Mot and NRJ

0.38

Correlation Coefficient

LVMH Mot  NRJ

Weak diversification

The 3 months correlation between LVMH and NRJ is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding LVMH Mot Hennessy and NRJ Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRJ Group 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 NRJ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NRJ Group has no effect on the direction of LVMH Mot i.e., LVMH Mot and NRJ go up and down completely randomly.

Pair Corralation between LVMH Mot and NRJ

Assuming the 90 days horizon LVMH Mot Hennessy is expected to under-perform the NRJ. In addition to that, LVMH Mot is 1.65 times more volatile than NRJ Group. It trades about -0.04 of its total potential returns per unit of risk. NRJ Group is currently generating about -0.01 per unit of volatility. If you would invest  694.00  in NRJ Group on December 27, 2024 and sell it today you would lose (10.00) from holding NRJ Group or give up 1.44% of portfolio value over 90 days.

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

LVMH Mot Hennessy  vs.  NRJ Group

LVMH Mot Hennessy

Risk-Adjusted Performance

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 somewhat strong basic indicators, LVMH Mot is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

NRJ Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days NRJ Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, NRJ 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 NRJ

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

The idea behind LVMH Mot Hennessy and NRJ Group 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.