Correlation Between LATAM Airlines and Fortrea Holdings
Can any of the company-specific risk be diversified away by investing in both LATAM Airlines and Fortrea Holdings 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 Fortrea Holdings 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 Fortrea Holdings, you can compare the effects of market volatilities on LATAM Airlines and Fortrea Holdings 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 Fortrea Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of LATAM Airlines and Fortrea Holdings.
Diversification Opportunities for LATAM Airlines and Fortrea Holdings
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between LATAM and Fortrea is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding LATAM Airlines Group and Fortrea Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortrea Holdings 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 Fortrea Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortrea Holdings has no effect on the direction of LATAM Airlines i.e., LATAM Airlines and Fortrea Holdings go up and down completely randomly.
Pair Corralation between LATAM Airlines and Fortrea Holdings
Considering the 90-day investment horizon LATAM Airlines Group is expected to generate 0.28 times more return on investment than Fortrea Holdings. However, LATAM Airlines Group is 3.53 times less risky than Fortrea Holdings. It trades about 0.03 of its potential returns per unit of risk. Fortrea Holdings is currently generating about -0.02 per unit of risk. If you would invest 2,657 in LATAM Airlines Group on October 24, 2024 and sell it today you would earn a total of 69.00 from holding LATAM Airlines Group or generate 2.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LATAM Airlines Group vs. Fortrea Holdings
Performance |
| Timeline |
| LATAM Airlines Group |
| Fortrea Holdings |
LATAM Airlines and Fortrea Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LATAM Airlines and Fortrea Holdings
The main advantage of trading using opposite LATAM Airlines and Fortrea Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LATAM Airlines position performs unexpectedly, Fortrea Holdings 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 Fortrea Holdings will offset losses from the drop in Fortrea Holdings' long position.| LATAM Airlines vs. U Haul Holding | LATAM Airlines vs. Eddy Smart Home | LATAM Airlines vs. SL Green Realty | LATAM Airlines vs. Lowes Companies |
| Fortrea Holdings vs. NH Foods Ltd | Fortrea Holdings vs. FitLife Brands, Common | Fortrea Holdings vs. International Consolidated Airlines | Fortrea Holdings vs. LATAM Airlines Group |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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