Correlation Between American Airlines and Copa Holdings
Can any of the company-specific risk be diversified away by investing in both American Airlines and Copa Holdings 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 American Airlines and Copa Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Airlines Group and Copa Holdings SA, you can compare the effects of market volatilities on American Airlines and Copa Holdings 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 American Airlines with a short position of Copa Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Copa Holdings.
Diversification Opportunities for American Airlines and Copa Holdings
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Copa is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Copa Holdings SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Copa Holdings SA and American 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 American Airlines Group are associated (or correlated) with Copa Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Copa Holdings SA has no effect on the direction of American Airlines i.e., American Airlines and Copa Holdings go up and down completely randomly.
Pair Corralation between American Airlines and Copa Holdings
Considering the 90-day investment horizon American Airlines is expected to generate 1.62 times less return on investment than Copa Holdings. In addition to that, American Airlines is 1.26 times more volatile than Copa Holdings SA. It trades about 0.01 of its total potential returns per unit of risk. Copa Holdings SA is currently generating about 0.03 per unit of volatility. If you would invest 7,801 in Copa Holdings SA on August 24, 2024 and sell it today you would earn a total of 1,536 from holding Copa Holdings SA or generate 19.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Airlines Group vs. Copa Holdings SA
Performance |
| Timeline |
| American Airlines |
| Copa Holdings SA |
American Airlines and Copa Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and Copa Holdings
The main advantage of trading using opposite American Airlines and Copa Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, Copa Holdings 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 Copa Holdings will offset losses from the drop in Copa Holdings' long position.| American Airlines vs. Delta Air Lines | American Airlines vs. Southwest Airlines | American Airlines vs. JetBlue Airways Corp | American Airlines vs. Spirit Airlines |
| Copa Holdings vs. SkyWest | Copa Holdings vs. Sun Country Airlines | Copa Holdings vs. Air Transport Services | Copa Holdings vs. Frontier Group Holdings |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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