Correlation Between Nike and LVMH Mot
Can any of the company-specific risk be diversified away by investing in both Nike 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 Nike and LVMH Mot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nike Inc and LVMH Mot Hennessy, you can compare the effects of market volatilities on Nike 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 Nike with a short position of LVMH Mot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nike and LVMH Mot.
Diversification Opportunities for Nike and LVMH Mot
Very weak diversification
The 3 months correlation between Nike and LVMH is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc 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 Nike 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 Nike Inc 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 Nike i.e., Nike and LVMH Mot go up and down completely randomly.
Pair Corralation between Nike and LVMH Mot
Considering the 90-day investment horizon Nike Inc is expected to under-perform the LVMH Mot. In addition to that, Nike is 1.13 times more volatile than LVMH Mot Hennessy. It trades about -0.14 of its total potential returns per unit of risk. LVMH Mot Hennessy is currently generating about 0.0 per unit of volatility. If you would invest 85,524 in LVMH Mot Hennessy on February 13, 2024 and sell it today you would lose (524.00) from holding LVMH Mot Hennessy or give up 0.61% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Nike Inc vs. LVMH Mot Hennessy
Performance |
Timeline |
Nike Inc |
LVMH Mot Hennessy |
Nike and LVMH Mot Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Nike and LVMH Mot
The main advantage of trading using opposite Nike and LVMH Mot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike 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 Nike Inc 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.LVMH Mot vs. Hermes International SA | LVMH Mot vs. Kering SA | LVMH Mot vs. Capri Holdings | LVMH Mot vs. Tapestry |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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