Correlation Between LATAM Airlines and Fonar

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

Diversification Opportunities for LATAM Airlines and Fonar

-0.04

Correlation Coefficient

LATAM Airlines  Fonar

Good diversification

The 3 months correlation between LATAM and Fonar is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding LATAM Airlines Group and Fonar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fonar 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 Fonar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fonar has no effect on the direction of LATAM Airlines i.e., LATAM Airlines and Fonar go up and down completely randomly.

Pair Corralation between LATAM Airlines and Fonar

Considering the 90-day investment horizon LATAM Airlines Group is expected to generate 0.91 times more return on investment than Fonar. However, LATAM Airlines Group is 1.1 times less risky than Fonar. It trades about 0.12 of its potential returns per unit of risk. Fonar is currently generating about -0.16 per unit of risk. If you would invest  2,470  in LATAM Airlines Group on July 25, 2024 and sell it today you would earn a total of  286.00  from holding LATAM Airlines Group or generate 11.58% return on investment over 90 days.

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

LATAM Airlines Group  vs.  Fonar

LATAM Airlines Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LATAM Airlines Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, LATAM Airlines may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Fonar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fonar 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 basic indicators remain relatively invariable which may send shares a bit higher in November 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with LATAM Airlines and Fonar

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

The idea behind LATAM Airlines Group and Fonar 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.