Correlation Between Micron Technology and LVMH Moët

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Can any of the company-specific risk be diversified away by investing in both Micron Technology and LVMH Moët 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 Micron Technology and LVMH Moët into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micron Technology and LVMH Mot Hennessy, you can compare the effects of market volatilities on Micron Technology and LVMH Moët 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 Micron Technology with a short position of LVMH Moët. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and LVMH Moët.

Diversification Opportunities for Micron Technology and LVMH Moët

-0.08
  Correlation Coefficient

Good diversification

The 3 months correlation between Micron and LVMH is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and LVMH Mot Hennessy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LVMH Mot Hennessy and Micron Technology 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 Micron Technology are associated (or correlated) with LVMH Moët. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LVMH Mot Hennessy has no effect on the direction of Micron Technology i.e., Micron Technology and LVMH Moët go up and down completely randomly.

Pair Corralation between Micron Technology and LVMH Moët

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 1.53 times more return on investment than LVMH Moët. However, Micron Technology is 1.53 times more volatile than LVMH Mot Hennessy. It trades about 0.01 of its potential returns per unit of risk. LVMH Mot Hennessy is currently generating about -0.03 per unit of risk. If you would invest  8,661  in Micron Technology on October 2, 2024 and sell it today you would lose (245.00) from holding Micron Technology or give up 2.83% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.57%
ValuesDaily Returns

Micron Technology  vs.  LVMH Mot Hennessy

 Performance 
       Timeline  
Micron Technology 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Micron Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak 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.
LVMH Mot Hennessy 

Risk-Adjusted Performance

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Weak
 
Strong
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 nearly stable technical indicators, LVMH Moët is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Micron Technology and LVMH Moët Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Micron Technology and LVMH Moët

The main advantage of trading using opposite Micron Technology and LVMH Moët positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology position performs unexpectedly, LVMH Moët 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 LVMH Moët will offset losses from the drop in LVMH Moët's long position.
The idea behind Micron Technology and LVMH Mot Hennessy 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.

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