Correlation Between Anheuser Busch and LATAM Airlines
Can any of the company-specific risk be diversified away by investing in both Anheuser Busch and LATAM Airlines 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 Anheuser Busch and LATAM Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Anheuser Busch Inbev and LATAM Airlines Group, you can compare the effects of market volatilities on Anheuser Busch and LATAM Airlines 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 Anheuser Busch with a short position of LATAM Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anheuser Busch and LATAM Airlines.
Diversification Opportunities for Anheuser Busch and LATAM Airlines
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Anheuser and LATAM is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Anheuser Busch Inbev and LATAM Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LATAM Airlines Group and Anheuser Busch 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 Anheuser Busch Inbev are associated (or correlated) with LATAM Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LATAM Airlines Group has no effect on the direction of Anheuser Busch i.e., Anheuser Busch and LATAM Airlines go up and down completely randomly.
Pair Corralation between Anheuser Busch and LATAM Airlines
Considering the 90-day investment horizon Anheuser Busch Inbev is expected to under-perform the LATAM Airlines. In addition to that, Anheuser Busch is 1.24 times more volatile than LATAM Airlines Group. It trades about -0.13 of its total potential returns per unit of risk. LATAM Airlines Group is currently generating about -0.04 per unit of volatility. If you would invest 2,757 in LATAM Airlines Group on October 20, 2024 and sell it today you would lose (31.00) from holding LATAM Airlines Group or give up 1.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Anheuser Busch Inbev vs. LATAM Airlines Group
Performance |
| Timeline |
| Anheuser Busch Inbev |
| LATAM Airlines Group |
Anheuser Busch and LATAM Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Anheuser Busch and LATAM Airlines
The main advantage of trading using opposite Anheuser Busch and LATAM Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anheuser Busch position performs unexpectedly, LATAM Airlines 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 LATAM Airlines will offset losses from the drop in LATAM Airlines' long position.| Anheuser Busch vs. Boston Beer | Anheuser Busch vs. Molson Coors Beverage | Anheuser Busch vs. Heineken NV | Anheuser Busch vs. Ambev SA ADR |
| LATAM Airlines vs. Sealed Air | LATAM Airlines vs. TFI International | LATAM Airlines vs. Codexis | LATAM Airlines vs. Balchem |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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