Correlation Between LATAM Airlines and Casio Computer

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

Diversification Opportunities for LATAM Airlines and Casio Computer

0.46

Correlation Coefficient

LATAM Airlines  Casio Computer

Very weak diversification

The 3 months correlation between LATAM and Casio is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding LATAM Airlines Group and Casio Computer Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Casio Computer 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 Casio Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Casio Computer has no effect on the direction of LATAM Airlines i.e., LATAM Airlines and Casio Computer go up and down completely randomly.

Pair Corralation between LATAM Airlines and Casio Computer

Considering the 90-day investment horizon LATAM Airlines Group is expected to generate 0.57 times more return on investment than Casio Computer. However, LATAM Airlines Group is 1.75 times less risky than Casio Computer. It trades about 0.16 of its potential returns per unit of risk. Casio Computer Co is currently generating about 0.05 per unit of risk. If you would invest  2,747  in LATAM Airlines Group on December 27, 2024 and sell it today you would earn a total of  389.00  from holding LATAM Airlines Group or generate 14.16% return on investment over 90 days.

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

LATAM Airlines Group  vs.  Casio Computer Co

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 12 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, LATAM Airlines displayed solid returns over the last few months and may actually be approaching a breakup point.

Casio Computer

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Casio Computer Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Casio Computer may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with LATAM Airlines and Casio Computer

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

The idea behind LATAM Airlines Group and Casio Computer Co 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.