Correlation Between Sociedad Qumica and LATAM Airlines
Can any of the company-specific risk be diversified away by investing in both Sociedad Qumica 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 Sociedad Qumica and LATAM Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sociedad Qumica y and LATAM Airlines Group, you can compare the effects of market volatilities on Sociedad Qumica 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 Sociedad Qumica with a short position of LATAM Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sociedad Qumica and LATAM Airlines.
Diversification Opportunities for Sociedad Qumica and LATAM Airlines
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Sociedad and LATAM is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Sociedad Qumica y 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 Sociedad Qumica 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 Sociedad Qumica y 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 Sociedad Qumica i.e., Sociedad Qumica and LATAM Airlines go up and down completely randomly.
Pair Corralation between Sociedad Qumica and LATAM Airlines
Assuming the 90 days trading horizon Sociedad Qumica y is expected to generate 1.25 times more return on investment than LATAM Airlines. However, Sociedad Qumica is 1.25 times more volatile than LATAM Airlines Group. It trades about 0.3 of its potential returns per unit of risk. LATAM Airlines Group is currently generating about 0.26 per unit of risk. If you would invest 3,629,000 in Sociedad Qumica y on November 2, 2024 and sell it today you would earn a total of 410,900 from holding Sociedad Qumica y or generate 11.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sociedad Qumica y vs. LATAM Airlines Group
Performance |
| Timeline |
| Sociedad Qumica y |
| LATAM Airlines Group |
Sociedad Qumica and LATAM Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sociedad Qumica and LATAM Airlines
The main advantage of trading using opposite Sociedad Qumica and LATAM Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sociedad Qumica 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.| Sociedad Qumica vs. Energia Latina SA | Sociedad Qumica vs. Administradora Americana de | Sociedad Qumica vs. Embotelladora Andina SA | Sociedad Qumica vs. Salfacorp |
| LATAM Airlines vs. Falabella | LATAM Airlines vs. Cencosud | LATAM Airlines vs. Enjoy SA | LATAM Airlines vs. Sociedad Qumica y |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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