Correlation Between LATAM Airlines and Banco De

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

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

Diversification Opportunities for LATAM Airlines and Banco De

0.83

Correlation Coefficient

LATAM Airlines  Banco De

Very poor diversification

The 3 months correlation between LATAM and Banco is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding LATAM Airlines Group and Banco de Credito in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco de Credito and LATAM Airlines 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 LATAM Airlines Group are associated (or correlated) with Banco De. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco de Credito has no effect on the direction of LATAM Airlines i.e., LATAM Airlines and Banco De go up and down completely randomly.

Pair Corralation between LATAM Airlines and Banco De

Assuming the 90 days trading horizon LATAM Airlines is expected to generate 2.67 times less return on investment than Banco De. In addition to that, LATAM Airlines is 1.02 times more volatile than Banco de Credito. It trades about 0.13 of its total potential returns per unit of risk. Banco de Credito is currently generating about 0.36 per unit of volatility. If you would invest  2,760,000  in Banco de Credito on December 29, 2024 and sell it today you would earn a total of  769,000  from holding Banco de Credito or generate 27.86% return on investment over 90 days.

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

LATAM Airlines Group  vs.  Banco de Credito

LATAM Airlines Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LATAM Airlines Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting primary indicators, LATAM Airlines may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Banco de Credito

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Banco de Credito are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Banco De displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LATAM Airlines and Banco De

The main advantage of trading using opposite LATAM Airlines and Banco De positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LATAM Airlines position performs unexpectedly, Banco De 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 Banco De will offset losses from the drop in Banco De's long position.

The idea behind LATAM Airlines Group and Banco de Credito 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..