Correlation Between LATAM Airlines and Upstream Bio,

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

Diversification Opportunities for LATAM Airlines and Upstream Bio,

0.07

Correlation Coefficient

LATAM Airlines  Upstream Bio,

Significant diversification

The 3 months correlation between LATAM and Upstream is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding LATAM Airlines Group and Upstream Bio, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Upstream Bio, 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 Upstream Bio,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Upstream Bio, has no effect on the direction of LATAM Airlines i.e., LATAM Airlines and Upstream Bio, go up and down completely randomly.

Pair Corralation between LATAM Airlines and Upstream Bio,

Considering the 90-day investment horizon LATAM Airlines is expected to generate 1.77 times less return on investment than Upstream Bio,. But when comparing it to its historical volatility, LATAM Airlines Group is 4.65 times less risky than Upstream Bio,. It trades about 0.06 of its potential returns per unit of risk. Upstream Bio, is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,700  in Upstream Bio, on October 10, 2024 and sell it today you would lose (83.00) from holding Upstream Bio, or give up 4.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	53.04%
Values	Daily Returns

LATAM Airlines Group  vs.  Upstream Bio,

LATAM Airlines Group

Risk-Adjusted Performance

3 of 100

Insignificant

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.

Upstream Bio,

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Upstream Bio, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak basic indicators, Upstream Bio, may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with LATAM Airlines and Upstream Bio,

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

The idea behind LATAM Airlines Group and Upstream Bio, 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.

Check out your portfolio center.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.