Correlation Between Cresud SACIF and LATAM Airlines

Can any of the company-specific risk be diversified away by investing in both Cresud SACIF 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 Cresud SACIF and LATAM Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cresud SACIF y and LATAM Airlines Group, you can compare the effects of market volatilities on Cresud SACIF 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 Cresud SACIF with a short position of LATAM Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cresud SACIF and LATAM Airlines.

Diversification Opportunities for Cresud SACIF and LATAM Airlines

0.4

Correlation Coefficient

Cresud SACIF  LATAM Airlines

Very weak diversification

The 3 months correlation between Cresud and LATAM is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Cresud SACIF 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 Cresud SACIF 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 Cresud SACIF 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 Cresud SACIF i.e., Cresud SACIF and LATAM Airlines go up and down completely randomly.

Pair Corralation between Cresud SACIF and LATAM Airlines

Assuming the 90 days horizon Cresud SACIF y is expected to under-perform the LATAM Airlines. In addition to that, Cresud SACIF is 2.06 times more volatile than LATAM Airlines Group. It trades about -0.03 of its total potential returns per unit of risk. LATAM Airlines Group is currently generating about -0.04 per unit of volatility. If you would invest  2,753  in LATAM Airlines Group on October 23, 2024 and sell it today you would lose (27.00) from holding LATAM Airlines Group or give up 0.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Cresud SACIF y  vs.  LATAM Airlines Group

Cresud SACIF y

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cresud SACIF y are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Cresud SACIF showed solid returns over the last few months and may actually be approaching a breakup point.

LATAM Airlines Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LATAM Airlines Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, LATAM Airlines is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Cresud SACIF and LATAM Airlines

The main advantage of trading using opposite Cresud SACIF and LATAM Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cresud SACIF 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.

The idea behind Cresud SACIF y and LATAM Airlines Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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.