Correlation Between Builders FirstSource and LATAM Airlines

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

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

Diversification Opportunities for Builders FirstSource and LATAM Airlines

0.22

Correlation Coefficient

Builders FirstSource  LATAM Airlines

Modest diversification

The 3 months correlation between Builders and LATAM is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Builders FirstSource 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 Builders FirstSource 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 Builders FirstSource 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 Builders FirstSource i.e., Builders FirstSource and LATAM Airlines go up and down completely randomly.

Pair Corralation between Builders FirstSource and LATAM Airlines

Given the investment horizon of 90 days Builders FirstSource is expected to under-perform the LATAM Airlines. In addition to that, Builders FirstSource is 1.33 times more volatile than LATAM Airlines Group. It trades about -0.16 of its total potential returns per unit of risk. LATAM Airlines Group is currently generating about 0.03 per unit of volatility. If you would invest  4,935  in LATAM Airlines Group on September 7, 2025 and sell it today you would earn a total of  148.00  from holding LATAM Airlines Group or generate 3.0% return on investment over 90 days.

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

Builders FirstSource  vs.  LATAM Airlines Group

Builders FirstSource

Risk-Adjusted Performance

Weakest

Over the last 90 days Builders FirstSource has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in January 2026. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

LATAM Airlines Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LATAM Airlines Group are ranked lower than 2 (%) 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.

Pair Trading with Builders FirstSource and LATAM Airlines

The main advantage of trading using opposite Builders FirstSource and LATAM Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Builders FirstSource 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 Builders FirstSource 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.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.