Correlation Between Copa Holdings and Leef Brands
Can any of the company-specific risk be diversified away by investing in both Copa Holdings and Leef Brands 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 Leef Brands 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 Leef Brands, you can compare the effects of market volatilities on Copa Holdings and Leef Brands 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 Leef Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Copa Holdings and Leef Brands.
Diversification Opportunities for Copa Holdings and Leef Brands
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Copa and Leef is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Copa Holdings SA and Leef Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leef Brands 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 Leef Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leef Brands has no effect on the direction of Copa Holdings i.e., Copa Holdings and Leef Brands go up and down completely randomly.
Pair Corralation between Copa Holdings and Leef Brands
Considering the 90-day investment horizon Copa Holdings SA is expected to under-perform the Leef Brands. But the stock apears to be less risky and, when comparing its historical volatility, Copa Holdings SA is 3.29 times less risky than Leef Brands. The stock trades about -0.05 of its potential returns per unit of risk. The Leef Brands is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 17.00 in Leef Brands on September 1, 2024 and sell it today you would lose (2.00) from holding Leef Brands or give up 11.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Copa Holdings SA vs. Leef Brands
Performance |
| Timeline |
| Copa Holdings SA |
| Leef Brands |
Copa Holdings and Leef Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Copa Holdings and Leef Brands
The main advantage of trading using opposite Copa Holdings and Leef Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Copa Holdings position performs unexpectedly, Leef Brands 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 Leef Brands will offset losses from the drop in Leef Brands' long position.| Copa Holdings vs. Canadian Pacific Railway | Copa Holdings vs. Volaris | Copa Holdings vs. Werner Enterprises | Copa Holdings vs. Canadian National Railway |
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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