Correlation Between LATAM Airlines and Bitcoin Depot

Can any of the company-specific risk be diversified away by investing in both LATAM Airlines and Bitcoin Depot 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 Bitcoin Depot 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 Bitcoin Depot, you can compare the effects of market volatilities on LATAM Airlines and Bitcoin Depot 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 Bitcoin Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of LATAM Airlines and Bitcoin Depot.

Diversification Opportunities for LATAM Airlines and Bitcoin Depot

-0.76

Correlation Coefficient

LATAM Airlines  Bitcoin Depot

Pay attention - limited upside

The 3 months correlation between LATAM and Bitcoin is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding LATAM Airlines Group and Bitcoin Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bitcoin Depot 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 Bitcoin Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bitcoin Depot has no effect on the direction of LATAM Airlines i.e., LATAM Airlines and Bitcoin Depot go up and down completely randomly.

Pair Corralation between LATAM Airlines and Bitcoin Depot

Considering the 90-day investment horizon LATAM Airlines Group is expected to generate 0.36 times more return on investment than Bitcoin Depot. However, LATAM Airlines Group is 2.75 times less risky than Bitcoin Depot. It trades about 0.2 of its potential returns per unit of risk. Bitcoin Depot is currently generating about -0.07 per unit of risk. If you would invest  2,775  in LATAM Airlines Group on December 20, 2024 and sell it today you would earn a total of  488.00  from holding LATAM Airlines Group or generate 17.59% return on investment over 90 days.

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

LATAM Airlines Group  vs.  Bitcoin Depot

LATAM Airlines Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LATAM Airlines Group are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, LATAM Airlines displayed solid returns over the last few months and may actually be approaching a breakup point.

Bitcoin Depot

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bitcoin Depot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with LATAM Airlines and Bitcoin Depot

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

The idea behind LATAM Airlines Group and Bitcoin Depot 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.