Correlation Between LVMH Moët and LIFENET INSURANCE

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

Diversification Opportunities for LVMH Moët and LIFENET INSURANCE

0.58

Correlation Coefficient

LVMH Moët  LIFENET INSURANCE

Very weak diversification

The 3 months correlation between LVMH and LIFENET is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding LVMH Mot Hennessy and LIFENET INSURANCE CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIFENET INSURANCE 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 LIFENET INSURANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LIFENET INSURANCE has no effect on the direction of LVMH Moët i.e., LVMH Moët and LIFENET INSURANCE go up and down completely randomly.

Pair Corralation between LVMH Moët and LIFENET INSURANCE

Assuming the 90 days trading horizon LVMH Mot Hennessy is expected to generate 1.17 times more return on investment than LIFENET INSURANCE. However, LVMH Moët is 1.17 times more volatile than LIFENET INSURANCE CO. It trades about -0.03 of its potential returns per unit of risk. LIFENET INSURANCE CO is currently generating about -0.06 per unit of risk. If you would invest  63,550  in LVMH Mot Hennessy on December 24, 2024 and sell it today you would lose (3,380) from holding LVMH Mot Hennessy or give up 5.32% of portfolio value over 90 days.

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

LVMH Mot Hennessy  vs.  LIFENET INSURANCE CO

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

LIFENET INSURANCE

Risk-Adjusted Performance

Very Weak

Over the last 90 days LIFENET INSURANCE CO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with LVMH Moët and LIFENET INSURANCE

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

The idea behind LVMH Mot Hennessy and LIFENET INSURANCE CO 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.