Correlation Between LATAM Airlines and Sapiens International
Can any of the company-specific risk be diversified away by investing in both LATAM Airlines and Sapiens International 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 Sapiens International 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 Sapiens International, you can compare the effects of market volatilities on LATAM Airlines and Sapiens International 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 Sapiens International. Check out your portfolio center. Please also check ongoing floating volatility patterns of LATAM Airlines and Sapiens International.
Diversification Opportunities for LATAM Airlines and Sapiens International
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between LATAM and Sapiens is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding LATAM Airlines Group and Sapiens International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sapiens International 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 Sapiens International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sapiens International has no effect on the direction of LATAM Airlines i.e., LATAM Airlines and Sapiens International go up and down completely randomly.
Pair Corralation between LATAM Airlines and Sapiens International
Considering the 90-day investment horizon LATAM Airlines Group is expected to generate 0.69 times more return on investment than Sapiens International. However, LATAM Airlines Group is 1.45 times less risky than Sapiens International. It trades about 0.09 of its potential returns per unit of risk. Sapiens International is currently generating about 0.02 per unit of risk. If you would invest 2,470 in LATAM Airlines Group on August 31, 2024 and sell it today you would earn a total of 303.00 from holding LATAM Airlines Group or generate 12.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 24.33% |
| Values | Daily Returns |
LATAM Airlines Group vs. Sapiens International
Performance |
| Timeline |
| LATAM Airlines Group |
| Sapiens International |
LATAM Airlines and Sapiens International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LATAM Airlines and Sapiens International
The main advantage of trading using opposite LATAM Airlines and Sapiens International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LATAM Airlines position performs unexpectedly, Sapiens International 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 Sapiens International will offset losses from the drop in Sapiens International's long position.| LATAM Airlines vs. Integral Ad Science | LATAM Airlines vs. Stagwell | LATAM Airlines vs. Axalta Coating Systems | LATAM Airlines vs. Hawkins |
| Sapiens International vs. MondayCom | Sapiens International vs. Gitlab Inc | Sapiens International vs. DocuSign |
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 CEOs Directory module to screen CEOs from public companies around the world.
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