Correlation Between LATAM Airlines and CSX

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

Diversification Opportunities for LATAM Airlines and CSX

0.97

Correlation Coefficient

LATAM Airlines  CSX

Almost no diversification

The 3 months correlation between LATAM and CSX is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding LATAM Airlines Group and CSX Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSX Corporation 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 CSX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSX Corporation has no effect on the direction of LATAM Airlines i.e., LATAM Airlines and CSX go up and down completely randomly.

Pair Corralation between LATAM Airlines and CSX

Considering the 90-day investment horizon LATAM Airlines Group is expected to generate 1.25 times more return on investment than CSX. However, LATAM Airlines is 1.25 times more volatile than CSX Corporation. It trades about 0.31 of its potential returns per unit of risk. CSX Corporation is currently generating about 0.29 per unit of risk. If you would invest  3,055  in LATAM Airlines Group on April 26, 2025 and sell it today you would earn a total of  1,115  from holding LATAM Airlines Group or generate 36.5% return on investment over 90 days.

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

LATAM Airlines Group  vs.  CSX Corp.

LATAM Airlines Group

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LATAM Airlines Group are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, LATAM Airlines displayed solid returns over the last few months and may actually be approaching a breakup point.

CSX Corporation

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CSX Corporation are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, CSX showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LATAM Airlines and CSX

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

The idea behind LATAM Airlines Group and CSX Corporation 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.