Correlation Between Citigroup and Copa Holdings

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

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

Diversification Opportunities for Citigroup and Copa Holdings

0.26

Correlation Coefficient

Citigroup  Copa Holdings

Modest diversification

The 3 months correlation between Citigroup and Copa is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup 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 Citigroup 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 Citigroup 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 Citigroup i.e., Citigroup and Copa Holdings go up and down completely randomly.

Pair Corralation between Citigroup and Copa Holdings

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.36 times less return on investment than Copa Holdings. In addition to that, Citigroup is 1.13 times more volatile than Copa Holdings SA. It trades about 0.04 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  8,612  in Copa Holdings SA on December 27, 2024 and sell it today you would earn a total of  985.00  from holding Copa Holdings SA or generate 11.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  Copa Holdings SA

Citigroup

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 Citigroup and Copa Holdings

The main advantage of trading using opposite Citigroup and Copa Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup 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 Citigroup 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.