Correlation Between SINGAPORE AIRLINES and LVMH Mot

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

Diversification Opportunities for SINGAPORE AIRLINES and LVMH Mot

0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between SINGAPORE and LVMH is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding SINGAPORE AIRLINES 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 SINGAPORE AIRLINES 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 SINGAPORE AIRLINES are associated (or correlated) with LVMH Mot. 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 SINGAPORE AIRLINES i.e., SINGAPORE AIRLINES and LVMH Mot go up and down completely randomly.

Pair Corralation between SINGAPORE AIRLINES and LVMH Mot

Assuming the 90 days trading horizon SINGAPORE AIRLINES is expected to under-perform the LVMH Mot. But the stock apears to be less risky and, when comparing its historical volatility, SINGAPORE AIRLINES is 1.46 times less risky than LVMH Mot. The stock trades about -0.06 of its potential returns per unit of risk. The LVMH Mot Hennessy is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  63,500  in LVMH Mot Hennessy on October 11, 2024 and sell it today you would lose (100.00) from holding LVMH Mot Hennessy or give up 0.16% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

SINGAPORE AIRLINES  vs.  LVMH Mot Hennessy

 Performance 
       Timeline  
SINGAPORE AIRLINES 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in SINGAPORE AIRLINES are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SINGAPORE AIRLINES is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.
LVMH Mot Hennessy 

Risk-Adjusted Performance

0 of 100

 
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. In spite of comparatively stable basic 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.

SINGAPORE AIRLINES and LVMH Mot Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SINGAPORE AIRLINES and LVMH Mot

The main advantage of trading using opposite SINGAPORE AIRLINES and LVMH Mot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SINGAPORE AIRLINES position performs unexpectedly, LVMH Mot 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 Mot will offset losses from the drop in LVMH Mot's long position.
The idea behind SINGAPORE AIRLINES 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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