Correlation Between Crimson Wine and LATAM Airlines

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

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

Diversification Opportunities for Crimson Wine and LATAM Airlines

-0.75

Correlation Coefficient

Crimson Wine  LATAM Airlines

Pay attention - limited upside

The 3 months correlation between Crimson and LATAM is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Crimson Wine 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 Crimson Wine 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 Crimson Wine 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 Crimson Wine i.e., Crimson Wine and LATAM Airlines go up and down completely randomly.

Pair Corralation between Crimson Wine and LATAM Airlines

Given the investment horizon of 90 days Crimson Wine is expected to under-perform the LATAM Airlines. But the otc stock apears to be less risky and, when comparing its historical volatility, Crimson Wine is 1.33 times less risky than LATAM Airlines. The otc stock trades about -0.08 of its potential returns per unit of risk. The LATAM Airlines Group is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,700  in LATAM Airlines Group on January 7, 2025 and sell it today you would earn a total of  189.00  from holding LATAM Airlines Group or generate 7.0% return on investment over 90 days.

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

Crimson Wine  vs.  LATAM Airlines Group

Crimson Wine

Risk-Adjusted Performance

Very Weak

Over the last 90 days Crimson Wine has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

LATAM Airlines Group

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in LATAM Airlines Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, LATAM Airlines may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Pair Trading with Crimson Wine and LATAM Airlines

The main advantage of trading using opposite Crimson Wine and LATAM Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crimson Wine 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 Crimson Wine 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 Global Correlations module to find global opportunities by holding instruments from different markets.