Correlation Between Christian Dior and LVMH Moët

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

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

Diversification Opportunities for Christian Dior and LVMH Moët

0.68

Correlation Coefficient

Christian Dior  LVMH Moët

Poor diversification

The 1 month correlation between Christian and LVMH is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Christian Dior SE 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 Christian Dior 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 Christian Dior SE are associated (or correlated) with LVMH Moët. 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 Christian Dior i.e., Christian Dior and LVMH Moët go up and down completely randomly.

Pair Corralation between Christian Dior and LVMH Moët

Assuming the 90 days horizon Christian Dior SE is expected to under-perform the LVMH Moët. But the stock apears to be less risky and, when comparing its historical volatility, Christian Dior SE is 1.56 times less risky than LVMH Moët. The stock trades about -0.14 of its potential returns per unit of risk. The LVMH Mot Hennessy is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  16,531  in LVMH Mot Hennessy on January 30, 2024 and sell it today you would lose (531.00) from holding LVMH Mot Hennessy or give up 3.21% of portfolio value over 90 days.

Time Period	1 Month [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Christian Dior SE  vs.  LVMH Mot Hennessy

Christian Dior SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Christian Dior SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

LVMH Mot Hennessy

Risk-Adjusted Performance

0 of 100

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 fragile performance, the Stock's technical indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Christian Dior and LVMH Moët

The main advantage of trading using opposite Christian Dior and LVMH Moët positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Christian Dior position performs unexpectedly, LVMH Moët 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 Moët will offset losses from the drop in LVMH Moët's long position.

The idea behind Christian Dior SE 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.