Correlation Between LVMH Mot and WIMFARM SA

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

Diversification Opportunities for LVMH Mot and WIMFARM SA

0.71

Correlation Coefficient

LVMH Mot  WIMFARM SA

Poor diversification

The 3 months correlation between LVMH and WIMFARM is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding LVMH Mot Hennessy and WIMFARM SA EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WIMFARM SA EO 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 WIMFARM SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WIMFARM SA EO has no effect on the direction of LVMH Mot i.e., LVMH Mot and WIMFARM SA go up and down completely randomly.

Pair Corralation between LVMH Mot and WIMFARM SA

Assuming the 90 days trading horizon LVMH Mot Hennessy is expected to generate 0.42 times more return on investment than WIMFARM SA. However, LVMH Mot Hennessy is 2.36 times less risky than WIMFARM SA. It trades about 0.06 of its potential returns per unit of risk. WIMFARM SA EO is currently generating about 0.02 per unit of risk. If you would invest  59,213  in LVMH Mot Hennessy on October 9, 2024 and sell it today you would earn a total of  2,087  from holding LVMH Mot Hennessy or generate 3.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.37%
Values	Daily Returns

LVMH Mot Hennessy  vs.  WIMFARM SA EO

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. In spite of comparatively stable technical indicators, LVMH Mot is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

WIMFARM SA EO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WIMFARM SA EO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, WIMFARM SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with LVMH Mot and WIMFARM SA

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

The idea behind LVMH Mot Hennessy and WIMFARM SA EO 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.