Correlation Between Boston Beer and LATAM Airlines

Can any of the company-specific risk be diversified away by investing in both Boston Beer and LATAM Airlines 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 Boston Beer and LATAM Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Boston Beer and LATAM Airlines Group, you can compare the effects of market volatilities on Boston Beer and LATAM Airlines 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 Boston Beer with a short position of LATAM Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Beer and LATAM Airlines.

Diversification Opportunities for Boston Beer and LATAM Airlines

-0.71

Correlation Coefficient

Boston Beer  LATAM Airlines

Pay attention - limited upside

The 3 months correlation between Boston and LATAM is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and LATAM Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LATAM Airlines Group and Boston Beer 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 Boston Beer are associated (or correlated) with LATAM Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LATAM Airlines Group has no effect on the direction of Boston Beer i.e., Boston Beer and LATAM Airlines go up and down completely randomly.

Pair Corralation between Boston Beer and LATAM Airlines

Considering the 90-day investment horizon Boston Beer is expected to under-perform the LATAM Airlines. In addition to that, Boston Beer is 1.32 times more volatile than LATAM Airlines Group. It trades about -0.29 of its total potential returns per unit of risk. LATAM Airlines Group is currently generating about 0.2 per unit of volatility. If you would invest  2,757  in LATAM Airlines Group on December 19, 2024 and sell it today you would earn a total of  488.00  from holding LATAM Airlines Group or generate 17.7% return on investment over 90 days.

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

Boston Beer  vs.  LATAM Airlines Group

Boston Beer

Risk-Adjusted Performance

Very Weak

Over the last 90 days Boston Beer has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady 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.

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 uncertain basic indicators, LATAM Airlines displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Boston Beer and LATAM Airlines

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

The idea behind Boston Beer and LATAM Airlines Group 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.