Correlation Between LATAM Airlines and AG Mortgage
Can any of the company-specific risk be diversified away by investing in both LATAM Airlines and AG Mortgage 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 AG Mortgage 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 AG Mortgage Investment, you can compare the effects of market volatilities on LATAM Airlines and AG Mortgage 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 AG Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of LATAM Airlines and AG Mortgage.
Diversification Opportunities for LATAM Airlines and AG Mortgage
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between LATAM and MITP is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding LATAM Airlines Group and AG Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AG Mortgage Investment 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 AG Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AG Mortgage Investment has no effect on the direction of LATAM Airlines i.e., LATAM Airlines and AG Mortgage go up and down completely randomly.
Pair Corralation between LATAM Airlines and AG Mortgage
Considering the 90-day investment horizon LATAM Airlines Group is expected to generate 2.77 times more return on investment than AG Mortgage. However, LATAM Airlines is 2.77 times more volatile than AG Mortgage Investment. It trades about 0.42 of its potential returns per unit of risk. AG Mortgage Investment is currently generating about -0.09 per unit of risk. If you would invest 2,714 in LATAM Airlines Group on November 6, 2024 and sell it today you would earn a total of 330.00 from holding LATAM Airlines Group or generate 12.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LATAM Airlines Group vs. AG Mortgage Investment
Performance |
| Timeline |
| LATAM Airlines Group |
| AG Mortgage Investment |
LATAM Airlines and AG Mortgage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LATAM Airlines and AG Mortgage
The main advantage of trading using opposite LATAM Airlines and AG Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LATAM Airlines position performs unexpectedly, AG Mortgage 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 AG Mortgage will offset losses from the drop in AG Mortgage's long position.| LATAM Airlines vs. Contextlogic | LATAM Airlines vs. RH | LATAM Airlines vs. Vita Coco | LATAM Airlines vs. The Gap, |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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