Correlation Between LVMH Mot and PLAYMATES TOYS

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

Diversification Opportunities for LVMH Mot and PLAYMATES TOYS

0.1

Correlation Coefficient

LVMH Mot  PLAYMATES TOYS

Average diversification

The 3 months correlation between LVMH and PLAYMATES is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding LVMH Mot Hennessy and PLAYMATES TOYS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PLAYMATES TOYS 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 PLAYMATES TOYS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PLAYMATES TOYS has no effect on the direction of LVMH Mot i.e., LVMH Mot and PLAYMATES TOYS go up and down completely randomly.

Pair Corralation between LVMH Mot and PLAYMATES TOYS

Assuming the 90 days trading horizon LVMH Mot Hennessy is expected to generate 0.45 times more return on investment than PLAYMATES TOYS. However, LVMH Mot Hennessy is 2.21 times less risky than PLAYMATES TOYS. It trades about 0.12 of its potential returns per unit of risk. PLAYMATES TOYS is currently generating about -0.03 per unit of risk. If you would invest  62,275  in LVMH Mot Hennessy on October 24, 2024 and sell it today you would earn a total of  8,705  from holding LVMH Mot Hennessy or generate 13.98% return on investment over 90 days.

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

LVMH Mot Hennessy  vs.  PLAYMATES TOYS

LVMH Mot Hennessy

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LVMH Mot Hennessy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical indicators, LVMH Mot displayed solid returns over the last few months and may actually be approaching a breakup point.

PLAYMATES TOYS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PLAYMATES TOYS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with LVMH Mot and PLAYMATES TOYS

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

The idea behind LVMH Mot Hennessy and PLAYMATES TOYS 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.