Correlation Between LATAM Airlines and Compania Cervecerias
Can any of the company-specific risk be diversified away by investing in both LATAM Airlines and Compania Cervecerias 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 LATAM Airlines and Compania Cervecerias into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LATAM Airlines Group and Compania Cervecerias Unidas, you can compare the effects of market volatilities on LATAM Airlines and Compania Cervecerias 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 LATAM Airlines with a short position of Compania Cervecerias. Check out your portfolio center. Please also check ongoing floating volatility patterns of LATAM Airlines and Compania Cervecerias.
Diversification Opportunities for LATAM Airlines and Compania Cervecerias
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between LATAM and Compania is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding LATAM Airlines Group and Compania Cervecerias Unidas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania Cervecerias and LATAM Airlines 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 LATAM Airlines Group are associated (or correlated) with Compania Cervecerias. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania Cervecerias has no effect on the direction of LATAM Airlines i.e., LATAM Airlines and Compania Cervecerias go up and down completely randomly.
Pair Corralation between LATAM Airlines and Compania Cervecerias
Considering the 90-day investment horizon LATAM Airlines Group is expected to generate 0.91 times more return on investment than Compania Cervecerias. However, LATAM Airlines Group is 1.1 times less risky than Compania Cervecerias. It trades about 0.1 of its potential returns per unit of risk. Compania Cervecerias Unidas is currently generating about -0.04 per unit of risk. If you would invest 2,470 in LATAM Airlines Group on August 30, 2024 and sell it today you would earn a total of 324.00 from holding LATAM Airlines Group or generate 13.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 71.43% |
| Values | Daily Returns |
LATAM Airlines Group vs. Compania Cervecerias Unidas
Performance |
| Timeline |
| LATAM Airlines Group |
| Compania Cervecerias |
LATAM Airlines and Compania Cervecerias Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LATAM Airlines and Compania Cervecerias
The main advantage of trading using opposite LATAM Airlines and Compania Cervecerias positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LATAM Airlines position performs unexpectedly, Compania Cervecerias 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 Compania Cervecerias will offset losses from the drop in Compania Cervecerias' long position.| LATAM Airlines vs. Marine Products | LATAM Airlines vs. Brunswick | LATAM Airlines vs. Mangazeya Mining | LATAM Airlines vs. Life Time Group |
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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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