Correlation Between LATAM Airlines and Gol Linhas

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

Diversification Opportunities for LATAM Airlines and Gol Linhas

0.0

Correlation Coefficient

LATAM Airlines  Gol Linhas

Pay attention - limited upside

The 3 months correlation between LATAM and Gol is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding LATAM Airlines Group and Gol Linhas Aereas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gol Linhas Aereas 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 Gol Linhas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gol Linhas Aereas has no effect on the direction of LATAM Airlines i.e., LATAM Airlines and Gol Linhas go up and down completely randomly.

Pair Corralation between LATAM Airlines and Gol Linhas

If you would invest (100.00) in LATAM Airlines Group on January 31, 2024 and sell it today you would earn a total of  100.00  from holding LATAM Airlines Group or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

LATAM Airlines Group  vs.  Gol Linhas Aereas

LATAM Airlines Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LATAM Airlines Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, LATAM Airlines is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Gol Linhas Aereas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gol Linhas Aereas has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in May 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with LATAM Airlines and Gol Linhas

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

The idea behind LATAM Airlines Group and Gol Linhas Aereas 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.