Correlation Between Alaska Air and Copa Holdings

Can any of the company-specific risk be diversified away by investing in both Alaska Air 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 Alaska Air and Copa Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alaska Air Group and Copa Holdings SA, you can compare the effects of market volatilities on Alaska Air 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 Alaska Air with a short position of Copa Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alaska Air and Copa Holdings.

Diversification Opportunities for Alaska Air and Copa Holdings

-0.25

Correlation Coefficient

Alaska Air  Copa Holdings

Very good diversification

The 3 months correlation between Alaska and Copa is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group 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 Alaska Air 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 Alaska Air Group 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 Alaska Air i.e., Alaska Air and Copa Holdings go up and down completely randomly.

Pair Corralation between Alaska Air and Copa Holdings

Considering the 90-day investment horizon Alaska Air Group is expected to under-perform the Copa Holdings. In addition to that, Alaska Air is 1.53 times more volatile than Copa Holdings SA. It trades about -0.12 of its total potential returns per unit of risk. Copa Holdings SA is currently generating about 0.11 per unit of volatility. If you would invest  8,590  in Copa Holdings SA on December 28, 2024 and sell it today you would earn a total of  963.00  from holding Copa Holdings SA or generate 11.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Alaska Air Group  vs.  Copa Holdings SA

Alaska Air Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alaska Air Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Copa Holdings SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Copa Holdings SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Copa Holdings may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Alaska Air and Copa Holdings

The main advantage of trading using opposite Alaska Air and Copa Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alaska Air 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.

The idea behind Alaska Air Group and Copa Holdings SA 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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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.