Correlation Between Alaska Air and Copa Holdings
Can any of the company-specific risk be diversified away by investing in both Alaska Air 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 Alaska Air and Copa Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alaska Air Group and Copa Holdings SA, you can compare the effects of market volatilities on Alaska Air 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 Alaska Air with a short position of Copa Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alaska Air and Copa Holdings.
Diversification Opportunities for Alaska Air and Copa Holdings
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Alaska and Copa is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air 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 Alaska Air 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 Alaska Air 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 Alaska Air i.e., Alaska Air and Copa Holdings go up and down completely randomly.
Pair Corralation between Alaska Air and Copa Holdings
Considering the 90-day investment horizon Alaska Air Group is expected to generate 1.2 times more return on investment than Copa Holdings. However, Alaska Air is 1.2 times more volatile than Copa Holdings SA. It trades about 0.06 of its potential returns per unit of risk. Copa Holdings SA is currently generating about 0.02 per unit of risk. If you would invest 3,973 in Alaska Air Group on August 27, 2024 and sell it today you would earn a total of 1,269 from holding Alaska Air Group or generate 31.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alaska Air Group vs. Copa Holdings SA
Performance |
| Timeline |
| Alaska Air Group |
| Copa Holdings SA |
Alaska Air and Copa Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alaska Air and Copa Holdings
The main advantage of trading using opposite Alaska Air and Copa Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alaska Air 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.| Alaska Air vs. Delta Air Lines | Alaska Air vs. United Airlines Holdings | Alaska Air vs. American Airlines Group | Alaska Air vs. JetBlue Airways Corp |
| 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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