Correlation Between LATAM Airlines and Compass Pathways

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

Diversification Opportunities for LATAM Airlines and Compass Pathways

-0.6

Correlation Coefficient

LATAM Airlines  Compass Pathways

Excellent diversification

The 3 months correlation between LATAM and Compass is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding LATAM Airlines Group and Compass Pathways Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Pathways Plc 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 Compass Pathways. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Pathways Plc has no effect on the direction of LATAM Airlines i.e., LATAM Airlines and Compass Pathways go up and down completely randomly.

Pair Corralation between LATAM Airlines and Compass Pathways

Considering the 90-day investment horizon LATAM Airlines is expected to generate 5.23 times less return on investment than Compass Pathways. But when comparing it to its historical volatility, LATAM Airlines Group is 2.25 times less risky than Compass Pathways. It trades about 0.03 of its potential returns per unit of risk. Compass Pathways Plc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  498.00  in Compass Pathways Plc on September 7, 2025 and sell it today you would earn a total of  84.00  from holding Compass Pathways Plc or generate 16.87% return on investment over 90 days.

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

LATAM Airlines Group  vs.  Compass Pathways Plc

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.

Compass Pathways Plc

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Compass Pathways Plc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Compass Pathways unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LATAM Airlines and Compass Pathways

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

The idea behind LATAM Airlines Group and Compass Pathways Plc 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.