Correlation Between Copa Holdings and Lake Resources
Can any of the company-specific risk be diversified away by investing in both Copa Holdings and Lake Resources 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 Lake Resources 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 Lake Resources NL, you can compare the effects of market volatilities on Copa Holdings and Lake Resources 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 Lake Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Copa Holdings and Lake Resources.
Diversification Opportunities for Copa Holdings and Lake Resources
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Copa and Lake is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Copa Holdings SA and Lake Resources NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lake Resources NL 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 Lake Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lake Resources NL has no effect on the direction of Copa Holdings i.e., Copa Holdings and Lake Resources go up and down completely randomly.
Pair Corralation between Copa Holdings and Lake Resources
Considering the 90-day investment horizon Copa Holdings is expected to generate 8.95 times less return on investment than Lake Resources. But when comparing it to its historical volatility, Copa Holdings SA is 4.93 times less risky than Lake Resources. It trades about 0.01 of its potential returns per unit of risk. Lake Resources NL is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 5.52 in Lake Resources NL on November 3, 2024 and sell it today you would lose (2.72) from holding Lake Resources NL or give up 49.28% 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. Lake Resources NL
Performance |
| Timeline |
| Copa Holdings SA |
| Lake Resources NL |
Copa Holdings and Lake Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Copa Holdings and Lake Resources
The main advantage of trading using opposite Copa Holdings and Lake Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Copa Holdings position performs unexpectedly, Lake Resources 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 Lake Resources will offset losses from the drop in Lake Resources' long position.| Copa Holdings vs. SkyWest | Copa Holdings vs. Sun Country Airlines | Copa Holdings vs. Air Transport Services | Copa Holdings vs. Frontier Group Holdings |
| Lake Resources vs. Ballys Corp | Lake Resources vs. RCI Hospitality Holdings | Lake Resources vs. RLJ Lodging Trust | Lake Resources vs. Summit Hotel Properties |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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