Correlation Between Copa Holdings and IMCD NV

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Can any of the company-specific risk be diversified away by investing in both Copa Holdings and IMCD NV 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 IMCD NV 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 IMCD NV, you can compare the effects of market volatilities on Copa Holdings and IMCD NV 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 IMCD NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Copa Holdings and IMCD NV.

Diversification Opportunities for Copa Holdings and IMCD NV

-0.02
  Correlation Coefficient

Good diversification

The 3 months correlation between Copa and IMCD is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Copa Holdings SA and IMCD NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IMCD NV 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 IMCD NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IMCD NV has no effect on the direction of Copa Holdings i.e., Copa Holdings and IMCD NV go up and down completely randomly.

Pair Corralation between Copa Holdings and IMCD NV

Considering the 90-day investment horizon Copa Holdings SA is expected to under-perform the IMCD NV. In addition to that, Copa Holdings is 1.91 times more volatile than IMCD NV. It trades about -0.23 of its total potential returns per unit of risk. IMCD NV is currently generating about 0.01 per unit of volatility. If you would invest  7,260  in IMCD NV on September 21, 2024 and sell it today you would lose (4.00) from holding IMCD NV or give up 0.06% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Copa Holdings SA  vs.  IMCD NV

 Performance 
       Timeline  
Copa Holdings SA 

Risk-Adjusted Performance

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Over the last 90 days Copa Holdings SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Copa Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.
IMCD NV 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days IMCD NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Copa Holdings and IMCD NV Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Copa Holdings and IMCD NV

The main advantage of trading using opposite Copa Holdings and IMCD NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Copa Holdings position performs unexpectedly, IMCD NV 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 IMCD NV will offset losses from the drop in IMCD NV's long position.
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The idea behind Copa Holdings SA and IMCD NV 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.
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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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.

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