Correlation Between Canadian National and LATAM Airlines
Can any of the company-specific risk be diversified away by investing in both Canadian National 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 Canadian National and LATAM Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canadian National Railway and LATAM Airlines Group, you can compare the effects of market volatilities on Canadian National 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 Canadian National with a short position of LATAM Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian National and LATAM Airlines.
Diversification Opportunities for Canadian National and LATAM Airlines
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Canadian and LATAM is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Canadian National Railway 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 Canadian National 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 Canadian National Railway 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 Canadian National i.e., Canadian National and LATAM Airlines go up and down completely randomly.
Pair Corralation between Canadian National and LATAM Airlines
Considering the 90-day investment horizon Canadian National is expected to generate 2.19 times less return on investment than LATAM Airlines. But when comparing it to its historical volatility, Canadian National Railway is 1.13 times less risky than LATAM Airlines. It trades about 0.05 of its potential returns per unit of risk. LATAM Airlines Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,710 in LATAM Airlines Group on August 31, 2024 and sell it today you would earn a total of 84.00 from holding LATAM Airlines Group or generate 3.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian National Railway vs. LATAM Airlines Group
Performance |
| Timeline |
| Canadian National Railway |
| LATAM Airlines Group |
Canadian National and LATAM Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian National and LATAM Airlines
The main advantage of trading using opposite Canadian National and LATAM Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian National 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.| Canadian National vs. Union Pacific | Canadian National vs. CSX Corporation | Canadian National vs. Norfolk Southern | Canadian National vs. Westinghouse Air Brake |
| LATAM Airlines vs. Integral Ad Science | LATAM Airlines vs. Stagwell | LATAM Airlines vs. Axalta Coating Systems | LATAM Airlines vs. Hawkins |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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