Correlation Between Copa Holdings and Azul SA
Can any of the company-specific risk be diversified away by investing in both Copa Holdings and Azul SA 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 Azul SA 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 Azul SA, you can compare the effects of market volatilities on Copa Holdings and Azul SA 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 Azul SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Copa Holdings and Azul SA.
Diversification Opportunities for Copa Holdings and Azul SA
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Copa and Azul is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Copa Holdings SA and Azul SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azul SA 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 Azul SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azul SA has no effect on the direction of Copa Holdings i.e., Copa Holdings and Azul SA go up and down completely randomly.
Pair Corralation between Copa Holdings and Azul SA
Considering the 90-day investment horizon Copa Holdings SA is expected to generate 0.7 times more return on investment than Azul SA. However, Copa Holdings SA is 1.42 times less risky than Azul SA. It trades about -0.07 of its potential returns per unit of risk. Azul SA is currently generating about -0.15 per unit of risk. If you would invest 9,912 in Copa Holdings SA on August 23, 2024 and sell it today you would lose (636.00) from holding Copa Holdings SA or give up 6.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Copa Holdings SA vs. Azul SA
Performance |
| Timeline |
| Copa Holdings SA |
| Azul SA |
Copa Holdings and Azul SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Copa Holdings and Azul SA
The main advantage of trading using opposite Copa Holdings and Azul SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Copa Holdings position performs unexpectedly, Azul SA 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 Azul SA will offset losses from the drop in Azul SA's long position.| 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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