Correlation Between LVMH Mot and Danone SA

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Can any of the company-specific risk be diversified away by investing in both LVMH Mot and Danone SA 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 Mot and Danone SA 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 Danone SA, you can compare the effects of market volatilities on LVMH Mot and Danone SA 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 Mot with a short position of Danone SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of LVMH Mot and Danone SA.

Diversification Opportunities for LVMH Mot and Danone SA

-0.47
  Correlation Coefficient

Very good diversification

The 3 months correlation between LVMH and Danone is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding LVMH Mot Hennessy and Danone SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danone SA and LVMH Mot 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 Danone SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danone SA has no effect on the direction of LVMH Mot i.e., LVMH Mot and Danone SA go up and down completely randomly.

Pair Corralation between LVMH Mot and Danone SA

Assuming the 90 days horizon LVMH Mot Hennessy is expected to under-perform the Danone SA. In addition to that, LVMH Mot is 1.41 times more volatile than Danone SA. It trades about -0.08 of its total potential returns per unit of risk. Danone SA is currently generating about -0.08 per unit of volatility. If you would invest  5,928  in Danone SA on March 28, 2024 and sell it today you would lose (112.00) from holding Danone SA or give up 1.89% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

LVMH Mot Hennessy  vs.  Danone SA

 Performance 
       Timeline  
LVMH Mot Hennessy 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days LVMH Mot Hennessy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
Danone SA 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Danone SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Danone SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

LVMH Mot and Danone SA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with LVMH Mot and Danone SA

The main advantage of trading using opposite LVMH Mot and Danone SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LVMH Mot position performs unexpectedly, Danone SA 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 Danone SA will offset losses from the drop in Danone SA's long position.
The idea behind LVMH Mot Hennessy and Danone SA 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.

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