Correlation Between LVMH Moët and Japan Steel

Can any of the company-specific risk be diversified away by investing in both LVMH Moët and Japan Steel 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 Moët and Japan Steel 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 The Japan Steel, you can compare the effects of market volatilities on LVMH Moët and Japan Steel 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 Moët with a short position of Japan Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of LVMH Moët and Japan Steel.

Diversification Opportunities for LVMH Moët and Japan Steel

-0.13

Correlation Coefficient

LVMH Moët  Japan Steel

Good diversification

The 3 months correlation between LVMH and Japan is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding LVMH Mot Hennessy and The Japan Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Steel and LVMH Moët 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 Japan Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Steel has no effect on the direction of LVMH Moët i.e., LVMH Moët and Japan Steel go up and down completely randomly.

Pair Corralation between LVMH Moët and Japan Steel

Assuming the 90 days trading horizon LVMH Moët is expected to generate 10.25 times less return on investment than Japan Steel. But when comparing it to its historical volatility, LVMH Mot Hennessy is 1.7 times less risky than Japan Steel. It trades about 0.0 of its potential returns per unit of risk. The Japan Steel is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,420  in The Japan Steel on October 10, 2024 and sell it today you would earn a total of  40.00  from holding The Japan Steel or generate 1.17% return on investment over 90 days.

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

LVMH Mot Hennessy  vs.  The Japan Steel

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

Japan Steel

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Japan Steel are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Japan Steel 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 Moët and Japan Steel

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

The idea behind LVMH Mot Hennessy and The Japan Steel 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.