Correlation Between UmweltBank and LVMH Mot

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

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

Diversification Opportunities for UmweltBank and LVMH Mot

-0.51

Correlation Coefficient

UmweltBank  LVMH Mot

Excellent diversification

The 3 months correlation between UmweltBank and LVMH is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding UmweltBank AG 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 UmweltBank 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 UmweltBank AG 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 UmweltBank i.e., UmweltBank and LVMH Mot go up and down completely randomly.

Pair Corralation between UmweltBank and LVMH Mot

Assuming the 90 days trading horizon UmweltBank AG is expected to generate 1.54 times more return on investment than LVMH Mot. However, UmweltBank is 1.54 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 -0.09 per unit of risk. If you would invest  622.00  in UmweltBank AG on October 10, 2024 and sell it today you would lose (4.00) from holding UmweltBank AG or give up 0.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

UmweltBank AG  vs.  LVMH Mot Hennessy

UmweltBank AG

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in UmweltBank AG are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, UmweltBank unveiled solid returns over the last few months and may actually be approaching a breakup point.

LVMH Mot Hennessy

Risk-Adjusted Performance

0 of 100

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 Mot is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with UmweltBank and LVMH Mot

The main advantage of trading using opposite UmweltBank and LVMH Mot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UmweltBank 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 UmweltBank AG 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.