Correlation Between CAC 40 and LVMH

By analyzing existing cross correlation between CAC 40 and LVMH you can compare the effects of market volatilities on CAC 40 and LVMH 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 CAC 40 with a short position of LVMH. Check out your portfolio center. Please also check ongoing floating volatility patterns of CAC 40 and LVMH.

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Can any of the company-specific risk be diversified away by investing in both CAC 40 and LVMH at the same time? Although using correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combing CAC 40 and LVMH into the same portfolio which is an essential part of fundamental portfolio management process.

Diversification Opportunities for CAC 40 and LVMH

0.75
Correlation
C4
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Poor diversification

The 3 months correlation between CAC 40 and LVMH is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding CAC 40 and LVMH in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on LVMH and CAC 40 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 CAC 40 are associated (or correlated) with LVMH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LVMH has no effect on the direction of CAC 40 i.e. CAC 40 and LVMH go up and down completely randomly.
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Pair Corralation between CAC 40 and LVMH

Assuming 30 trading days horizon, CAC 40 is expected to under-perform the LVMH. But the index apears to be less risky and, when comparing its historical volatility, CAC 40 is 1.32 times less risky than LVMH. The index trades about -0.04 of its potential returns per unit of risk. The LVMH is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  37,085  in LVMH on April 28, 2020 and sell it today you would lose (1,100)  from holding LVMH or give up 2.97% of portfolio value over 30 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy85.71%
ValuesDaily Returns

CAC 40  vs.  LVMH

 Performance (%) 
      Timeline 
 Predicted Return Density 
      Returns 

LVMH

Pair trading matchups for LVMH

Check out your portfolio center. Please also try Pattern Recognition module to use different pattern recognition models to time the market across multiple global exchanges.


 
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