Correlation Between NYSE Composite and LATAM Airlines
Can any of the company-specific risk be diversified away by investing in both NYSE Composite 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 NYSE Composite and LATAM Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and LATAM Airlines Group, you can compare the effects of market volatilities on NYSE Composite 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 NYSE Composite with a short position of LATAM Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and LATAM Airlines.
Diversification Opportunities for NYSE Composite and LATAM Airlines
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and LATAM is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite 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 NYSE Composite 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 NYSE Composite 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 NYSE Composite i.e., NYSE Composite and LATAM Airlines go up and down completely randomly.
Pair Corralation between NYSE Composite and LATAM Airlines
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.46 times more return on investment than LATAM Airlines. However, NYSE Composite is 2.18 times less risky than LATAM Airlines. It trades about 0.24 of its potential returns per unit of risk. LATAM Airlines Group is currently generating about -0.1 per unit of risk. If you would invest 1,954,967 in NYSE Composite on August 28, 2024 and sell it today you would earn a total of 67,069 from holding NYSE Composite or generate 3.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. LATAM Airlines Group
Performance |
| Timeline |
NYSE Composite and LATAM Airlines Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
LATAM Airlines Group
Pair trading matchups for LATAM Airlines
Pair Trading with NYSE Composite and LATAM Airlines
The main advantage of trading using opposite NYSE Composite and LATAM Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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.| NYSE Composite vs. Hooker Furniture | NYSE Composite vs. Hudson Pacific Properties | NYSE Composite vs. Canlan Ice Sports | NYSE Composite vs. Boston Properties |
| LATAM Airlines vs. Ryanair Holdings PLC | LATAM Airlines vs. Marine Products | LATAM Airlines vs. Gentex | LATAM Airlines vs. PACCAR Inc |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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