Correlation Between Trade Desk and LVMH Mot

Can any of the company-specific risk be diversified away by investing in both Trade Desk 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 Trade Desk and LVMH Mot into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Trade Desk and LVMH Mot Hennessy, you can compare the effects of market volatilities on Trade Desk 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 Trade Desk with a short position of LVMH Mot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trade Desk and LVMH Mot.

Diversification Opportunities for Trade Desk and LVMH Mot

0.07

Correlation Coefficient

Trade Desk  LVMH Mot

Significant diversification

The 3 months correlation between Trade and LVMH is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding The Trade Desk 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 Trade Desk 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 The Trade Desk 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 Trade Desk i.e., Trade Desk and LVMH Mot go up and down completely randomly.

Pair Corralation between Trade Desk and LVMH Mot

Assuming the 90 days trading horizon The Trade Desk is expected to under-perform the LVMH Mot. In addition to that, Trade Desk is 1.07 times more volatile than LVMH Mot Hennessy. It trades about -0.09 of its total potential returns per unit of risk. LVMH Mot Hennessy is currently generating about 0.24 per unit of volatility. If you would invest  59,165  in LVMH Mot Hennessy on October 26, 2024 and sell it today you would earn a total of  12,705  from holding LVMH Mot Hennessy or generate 21.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.5%
Values	Daily Returns

The Trade Desk  vs.  LVMH Mot Hennessy

Trade Desk

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Trade Desk are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Trade Desk may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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. Despite somewhat fragile technical indicators, LVMH Mot sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Trade Desk and LVMH Mot

The main advantage of trading using opposite Trade Desk and LVMH Mot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trade Desk 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 The Trade Desk 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.