Correlation Between Werner Enterprises and LATAM Airlines
Can any of the company-specific risk be diversified away by investing in both Werner Enterprises 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 Werner Enterprises and LATAM Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Werner Enterprises and LATAM Airlines Group, you can compare the effects of market volatilities on Werner Enterprises 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 Werner Enterprises with a short position of LATAM Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Werner Enterprises and LATAM Airlines.
Diversification Opportunities for Werner Enterprises and LATAM Airlines
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Werner and LATAM is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Werner Enterprises 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 Werner Enterprises 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 Werner Enterprises 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 Werner Enterprises i.e., Werner Enterprises and LATAM Airlines go up and down completely randomly.
Pair Corralation between Werner Enterprises and LATAM Airlines
Given the investment horizon of 90 days Werner Enterprises is expected to generate 1.44 times more return on investment than LATAM Airlines. However, Werner Enterprises is 1.44 times more volatile than LATAM Airlines Group. It trades about 0.18 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 3,730 in Werner Enterprises on August 31, 2024 and sell it today you would earn a total of 316.00 from holding Werner Enterprises or generate 8.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Werner Enterprises vs. LATAM Airlines Group
Performance |
| Timeline |
| Werner Enterprises |
| LATAM Airlines Group |
Werner Enterprises and LATAM Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Werner Enterprises and LATAM Airlines
The main advantage of trading using opposite Werner Enterprises and LATAM Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Werner Enterprises 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.| Werner Enterprises vs. Heartland Express | Werner Enterprises vs. Universal Logistics Holdings | Werner Enterprises vs. Schneider National | Werner Enterprises vs. Marten Transport |
| LATAM Airlines vs. Integral Ad Science | LATAM Airlines vs. Stagwell | LATAM Airlines vs. Axalta Coating Systems | LATAM Airlines vs. Hawkins |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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