Correlation Between LATAM Airlines and Cresud SACIF

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

Diversification Opportunities for LATAM Airlines and Cresud SACIF

0.67

Correlation Coefficient

LATAM Airlines  Cresud SACIF

Poor diversification

The 3 months correlation between LATAM and Cresud is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding LATAM Airlines Group and Cresud SACIF y in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cresud SACIF y 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 Cresud SACIF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cresud SACIF y has no effect on the direction of LATAM Airlines i.e., LATAM Airlines and Cresud SACIF go up and down completely randomly.

Pair Corralation between LATAM Airlines and Cresud SACIF

Considering the 90-day investment horizon LATAM Airlines Group is expected to under-perform the Cresud SACIF. But the stock apears to be less risky and, when comparing its historical volatility, LATAM Airlines Group is 2.48 times less risky than Cresud SACIF. The stock trades about -0.31 of its potential returns per unit of risk. The Cresud SACIF y is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,368  in Cresud SACIF y on October 8, 2024 and sell it today you would lose (24.00) from holding Cresud SACIF y or give up 1.75% of portfolio value over 90 days.

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

LATAM Airlines Group  vs.  Cresud SACIF y

LATAM Airlines Group

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LATAM Airlines Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, LATAM Airlines is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Cresud SACIF y

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cresud SACIF y are ranked lower than 19 (%) 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.

Pair Trading with LATAM Airlines and Cresud SACIF

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

The idea behind LATAM Airlines Group and Cresud SACIF y 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.