Correlation Between China Southern and Copa Holdings
Can any of the company-specific risk be diversified away by investing in both China Southern and Copa Holdings 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 China Southern and Copa Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Southern Airlines and Copa Holdings SA, you can compare the effects of market volatilities on China Southern and Copa Holdings 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 China Southern with a short position of Copa Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Southern and Copa Holdings.
Diversification Opportunities for China Southern and Copa Holdings
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between China and Copa is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding China Southern Airlines and Copa Holdings SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Copa Holdings SA and China Southern 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 China Southern Airlines are associated (or correlated) with Copa Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Copa Holdings SA has no effect on the direction of China Southern i.e., China Southern and Copa Holdings go up and down completely randomly.
Pair Corralation between China Southern and Copa Holdings
Assuming the 90 days trading horizon China Southern Airlines is expected to under-perform the Copa Holdings. In addition to that, China Southern is 1.24 times more volatile than Copa Holdings SA. It trades about -0.01 of its total potential returns per unit of risk. Copa Holdings SA is currently generating about 0.03 per unit of volatility. If you would invest 7,459 in Copa Holdings SA on August 26, 2024 and sell it today you would earn a total of 1,741 from holding Copa Holdings SA or generate 23.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Southern Airlines vs. Copa Holdings SA
Performance |
| Timeline |
| China Southern Airlines |
| Copa Holdings SA |
China Southern and Copa Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Southern and Copa Holdings
The main advantage of trading using opposite China Southern and Copa Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Southern position performs unexpectedly, Copa Holdings 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 Copa Holdings will offset losses from the drop in Copa Holdings' long position.| China Southern vs. LG Display Co | China Southern vs. Spirent Communications plc | China Southern vs. InPlay Oil Corp | China Southern vs. Sixt Leasing SE |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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