Correlation Between LVMH Moët and Walmart
Can any of the company-specific risk be diversified away by investing in both LVMH Moët and Walmart 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 LVMH Moët and Walmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LVMH Mot Hennessy and Walmart, you can compare the effects of market volatilities on LVMH Moët and Walmart 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 LVMH Moët with a short position of Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of LVMH Moët and Walmart.
Diversification Opportunities for LVMH Moët and Walmart
Very poor diversification
The 3 months correlation between LVMH and Walmart is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding LVMH Mot Hennessy and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and LVMH Moët 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 LVMH Mot Hennessy are associated (or correlated) with Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of LVMH Moët i.e., LVMH Moët and Walmart go up and down completely randomly.
Pair Corralation between LVMH Moët and Walmart
Assuming the 90 days horizon LVMH Mot Hennessy is expected to under-perform the Walmart. In addition to that, LVMH Moët is 2.02 times more volatile than Walmart. It trades about -0.31 of its total potential returns per unit of risk. Walmart is currently generating about -0.25 per unit of volatility. If you would invest 6,125 in Walmart on January 20, 2024 and sell it today you would lose (199.00) from holding Walmart or give up 3.25% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 95.45% |
Values | Daily Returns |
LVMH Mot Hennessy vs. Walmart
Performance |
Timeline |
LVMH Mot Hennessy |
Walmart |
LVMH Moët and Walmart Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with LVMH Moët and Walmart
The main advantage of trading using opposite LVMH Moët and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LVMH Moët position performs unexpectedly, Walmart 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 Walmart will offset losses from the drop in Walmart's long position.LVMH Moët vs. Hermes International SA | LVMH Moët vs. Kering SA | LVMH Moët vs. Capri Holdings | LVMH Moët vs. Tapestry |
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Check out your portfolio center.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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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