Correlation Between Copa Holdings and Niagara Mohawk
Can any of the company-specific risk be diversified away by investing in both Copa Holdings and Niagara Mohawk 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 Niagara Mohawk 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 Niagara Mohawk Power, you can compare the effects of market volatilities on Copa Holdings and Niagara Mohawk 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 Niagara Mohawk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Copa Holdings and Niagara Mohawk.
Diversification Opportunities for Copa Holdings and Niagara Mohawk
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Copa and Niagara is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Copa Holdings SA and Niagara Mohawk Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Niagara Mohawk Power 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 Niagara Mohawk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Niagara Mohawk Power has no effect on the direction of Copa Holdings i.e., Copa Holdings and Niagara Mohawk go up and down completely randomly.
Pair Corralation between Copa Holdings and Niagara Mohawk
Considering the 90-day investment horizon Copa Holdings SA is expected to under-perform the Niagara Mohawk. In addition to that, Copa Holdings is 1.88 times more volatile than Niagara Mohawk Power. It trades about -0.2 of its total potential returns per unit of risk. Niagara Mohawk Power is currently generating about -0.23 per unit of volatility. If you would invest 6,750 in Niagara Mohawk Power on September 15, 2024 and sell it today you would lose (550.00) from holding Niagara Mohawk Power or give up 8.15% 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. Niagara Mohawk Power
Performance |
| Timeline |
| Copa Holdings SA |
| Niagara Mohawk Power |
Copa Holdings and Niagara Mohawk Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Copa Holdings and Niagara Mohawk
The main advantage of trading using opposite Copa Holdings and Niagara Mohawk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Copa Holdings position performs unexpectedly, Niagara Mohawk 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 Niagara Mohawk will offset losses from the drop in Niagara Mohawk's long position.The idea behind Copa Holdings SA and Niagara Mohawk Power 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.| Niagara Mohawk vs. Copa Holdings SA | Niagara Mohawk vs. United Airlines Holdings | Niagara Mohawk vs. Delta Air Lines | Niagara Mohawk vs. SkyWest |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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