Correlation Between Copa Holdings and Hyundai
Can any of the company-specific risk be diversified away by investing in both Copa Holdings and Hyundai 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 Copa Holdings and Hyundai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Copa Holdings SA and Hyundai Motor, you can compare the effects of market volatilities on Copa Holdings and Hyundai 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 Copa Holdings with a short position of Hyundai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Copa Holdings and Hyundai.
Diversification Opportunities for Copa Holdings and Hyundai
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Copa and Hyundai is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Copa Holdings SA and Hyundai Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Motor and Copa Holdings 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 Copa Holdings SA are associated (or correlated) with Hyundai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyundai Motor has no effect on the direction of Copa Holdings i.e., Copa Holdings and Hyundai go up and down completely randomly.
Pair Corralation between Copa Holdings and Hyundai
Assuming the 90 days horizon Copa Holdings is expected to generate 2.63 times less return on investment than Hyundai. But when comparing it to its historical volatility, Copa Holdings SA is 1.06 times less risky than Hyundai. It trades about 0.03 of its potential returns per unit of risk. Hyundai Motor is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,573 in Hyundai Motor on August 26, 2024 and sell it today you would earn a total of 2,707 from holding Hyundai Motor or generate 105.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Copa Holdings SA vs. Hyundai Motor
Performance |
| Timeline |
| Copa Holdings SA |
| Hyundai Motor |
Copa Holdings and Hyundai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Copa Holdings and Hyundai
The main advantage of trading using opposite Copa Holdings and Hyundai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Copa Holdings position performs unexpectedly, Hyundai 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 Hyundai will offset losses from the drop in Hyundai's long position.The idea behind Copa Holdings SA and Hyundai Motor 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.| Hyundai vs. Tesla Inc | Hyundai vs. BYD Company Limited | Hyundai vs. Superior Plus Corp | Hyundai vs. NMI 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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