Correlation Between Copa Holdings and Embraer SA
Can any of the company-specific risk be diversified away by investing in both Copa Holdings and Embraer 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 Embraer 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 Embraer SA ADR, you can compare the effects of market volatilities on Copa Holdings and Embraer 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 Embraer SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Copa Holdings and Embraer SA.
Diversification Opportunities for Copa Holdings and Embraer SA
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Copa and Embraer is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Copa Holdings SA and Embraer SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embraer SA ADR 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 Embraer SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embraer SA ADR has no effect on the direction of Copa Holdings i.e., Copa Holdings and Embraer SA go up and down completely randomly.
Pair Corralation between Copa Holdings and Embraer SA
Considering the 90-day investment horizon Copa Holdings is expected to generate 2.69 times less return on investment than Embraer SA. But when comparing it to its historical volatility, Copa Holdings SA is 1.11 times less risky than Embraer SA. It trades about 0.04 of its potential returns per unit of risk. Embraer SA ADR is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 3,281 in Embraer SA ADR on August 31, 2024 and sell it today you would earn a total of 539.00 from holding Embraer SA ADR or generate 16.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Copa Holdings SA vs. Embraer SA ADR
Performance |
| Timeline |
| Copa Holdings SA |
| Embraer SA ADR |
Copa Holdings and Embraer SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Copa Holdings and Embraer SA
The main advantage of trading using opposite Copa Holdings and Embraer SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Copa Holdings position performs unexpectedly, Embraer 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 Embraer SA will offset losses from the drop in Embraer SA's long position.| Copa Holdings vs. JetBlue Airways Corp | Copa Holdings vs. Allegiant Travel | Copa Holdings vs. SkyWest | Copa Holdings vs. Air Transport Services |
| Embraer SA vs. HEICO | Embraer SA vs. Vertical Aerospace | Embraer SA vs. Rolls Royce Holdings plc | Embraer SA vs. Rocket Lab USA |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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