Correlation Between Stagwell and LATAM Airlines
Can any of the company-specific risk be diversified away by investing in both Stagwell 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 Stagwell and LATAM Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stagwell and LATAM Airlines Group, you can compare the effects of market volatilities on Stagwell 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 Stagwell with a short position of LATAM Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stagwell and LATAM Airlines.
Diversification Opportunities for Stagwell and LATAM Airlines
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Stagwell and LATAM is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Stagwell 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 Stagwell 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 Stagwell 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 Stagwell i.e., Stagwell and LATAM Airlines go up and down completely randomly.
Pair Corralation between Stagwell and LATAM Airlines
Given the investment horizon of 90 days Stagwell is expected to generate 1.58 times more return on investment than LATAM Airlines. However, Stagwell is 1.58 times more volatile than LATAM Airlines Group. It trades about 0.38 of its potential returns per unit of risk. LATAM Airlines Group is currently generating about 0.11 per unit of risk. If you would invest 650.00 in Stagwell on September 2, 2024 and sell it today you would earn a total of 136.00 from holding Stagwell or generate 20.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stagwell vs. LATAM Airlines Group
Performance |
| Timeline |
| Stagwell |
| LATAM Airlines Group |
Stagwell and LATAM Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stagwell and LATAM Airlines
The main advantage of trading using opposite Stagwell and LATAM Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stagwell 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.| Stagwell vs. ADTRAN Inc | Stagwell vs. Belden Inc | Stagwell vs. ADC Therapeutics SA | Stagwell vs. Comtech Telecommunications Corp |
| LATAM Airlines vs. Bt Brands | LATAM Airlines vs. ChampionX | LATAM Airlines vs. Primoris Services | LATAM Airlines vs. BJs Restaurants |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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