Correlation Between LATAM Airlines and Freeport

Can any of the company-specific risk be diversified away by investing in both LATAM Airlines and Freeport 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 Freeport 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 Freeport McMoRan 4125 percent, you can compare the effects of market volatilities on LATAM Airlines and Freeport 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 Freeport. Check out your portfolio center. Please also check ongoing floating volatility patterns of LATAM Airlines and Freeport.

Diversification Opportunities for LATAM Airlines and Freeport

0.05

Correlation Coefficient

LATAM Airlines  Freeport

Significant diversification

The 3 months correlation between LATAM and Freeport is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding LATAM Airlines Group and Freeport McMoRan 4125 percent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoRan 4125 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 Freeport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freeport McMoRan 4125 has no effect on the direction of LATAM Airlines i.e., LATAM Airlines and Freeport go up and down completely randomly.

Pair Corralation between LATAM Airlines and Freeport

Considering the 90-day investment horizon LATAM Airlines Group is expected to under-perform the Freeport. But the stock apears to be less risky and, when comparing its historical volatility, LATAM Airlines Group is 1.07 times less risky than Freeport. The stock trades about -0.23 of its potential returns per unit of risk. The Freeport McMoRan 4125 percent is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  9,807  in Freeport McMoRan 4125 percent on October 10, 2024 and sell it today you would lose (276.00) from holding Freeport McMoRan 4125 percent or give up 2.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

LATAM Airlines Group  vs.  Freeport McMoRan 4125 percent

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.

Freeport McMoRan 4125

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Freeport McMoRan 4125 percent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Freeport is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with LATAM Airlines and Freeport

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

The idea behind LATAM Airlines Group and Freeport McMoRan 4125 percent 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.