Correlation Between Azul SA and Copa Holdings
Can any of the company-specific risk be diversified away by investing in both Azul SA 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 Azul SA and Copa Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Azul SA and Copa Holdings SA, you can compare the effects of market volatilities on Azul SA 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 Azul SA with a short position of Copa Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Azul SA and Copa Holdings.
Diversification Opportunities for Azul SA and Copa Holdings
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Azul and Copa is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Azul SA 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 Azul SA 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 Azul SA 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 Azul SA i.e., Azul SA and Copa Holdings go up and down completely randomly.
Pair Corralation between Azul SA and Copa Holdings
Given the investment horizon of 90 days Azul SA is expected to under-perform the Copa Holdings. In addition to that, Azul SA is 3.12 times more volatile than Copa Holdings SA. It trades about -0.07 of its total potential returns per unit of risk. Copa Holdings SA is currently generating about 0.04 per unit of volatility. If you would invest 8,958 in Copa Holdings SA on August 23, 2024 and sell it today you would earn a total of 318.00 from holding Copa Holdings SA or generate 3.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Azul SA vs. Copa Holdings SA
Performance |
| Timeline |
| Azul SA |
| Copa Holdings SA |
Azul SA and Copa Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Azul SA and Copa Holdings
The main advantage of trading using opposite Azul SA and Copa Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Azul SA 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.The idea behind Azul SA and Copa Holdings SA 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.| 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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