Correlation Between LOreal SA and LVMH Mot

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

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

Diversification Opportunities for LOreal SA and LVMH Mot

0.64

Correlation Coefficient

LOreal SA  LVMH Mot

Poor diversification

The 3 months correlation between LOreal and LVMH is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding LOreal SA 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 LOreal SA 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 LOreal SA 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 LOreal SA i.e., LOreal SA and LVMH Mot go up and down completely randomly.

Pair Corralation between LOreal SA and LVMH Mot

Assuming the 90 days horizon LOreal SA is expected to generate 0.79 times more return on investment than LVMH Mot. However, LOreal SA is 1.26 times less risky than LVMH Mot. It trades about 0.02 of its potential returns per unit of risk. LVMH Mot Hennessy is currently generating about 0.0 per unit of risk. If you would invest  35,693  in LOreal SA on April 20, 2025 and sell it today you would earn a total of  562.00  from holding LOreal SA or generate 1.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

LOreal SA  vs.  LVMH Mot Hennessy

LOreal SA

Risk-Adjusted Performance

Weak

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

LVMH Mot Hennessy

Risk-Adjusted Performance

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 somewhat strong basic indicators, LVMH Mot is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with LOreal SA and LVMH Mot

The main advantage of trading using opposite LOreal SA and LVMH Mot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LOreal SA 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 LOreal SA 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.