Correlation Between Superior Drilling and LATAM Airlines

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

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

Diversification Opportunities for Superior Drilling and LATAM Airlines

0.0

Correlation Coefficient

Superior Drilling  LATAM Airlines

Pay attention - limited upside

The 3 months correlation between Superior and LATAM is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Superior Drilling Products 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 Superior Drilling 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 Superior Drilling Products 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 Superior Drilling i.e., Superior Drilling and LATAM Airlines go up and down completely randomly.

Pair Corralation between Superior Drilling and LATAM Airlines

If you would invest  108.00  in Superior Drilling Products on March 5, 2024 and sell it today you would earn a total of  28.00  from holding Superior Drilling Products or generate 25.93% return on investment over 90 days.

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

Superior Drilling Products  vs.  LATAM Airlines Group

Superior Drilling

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Superior Drilling Products are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Superior Drilling demonstrated solid returns over the last few months and may actually be approaching a breakup point.

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 latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Superior Drilling and LATAM Airlines

The main advantage of trading using opposite Superior Drilling and LATAM Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Superior Drilling 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 Superior Drilling Products 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.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.