Correlation Between Copa Holdings and PennantPark Investment

Can any of the company-specific risk be diversified away by investing in both Copa Holdings and PennantPark Investment 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 PennantPark Investment 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 PennantPark Investment, you can compare the effects of market volatilities on Copa Holdings and PennantPark Investment 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 PennantPark Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Copa Holdings and PennantPark Investment.

Diversification Opportunities for Copa Holdings and PennantPark Investment

0.49

Correlation Coefficient

Copa Holdings  PennantPark Investment

Very weak diversification

The 3 months correlation between Copa and PennantPark is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Copa Holdings SA and PennantPark Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennantPark Investment 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 PennantPark Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PennantPark Investment has no effect on the direction of Copa Holdings i.e., Copa Holdings and PennantPark Investment go up and down completely randomly.

Pair Corralation between Copa Holdings and PennantPark Investment

Assuming the 90 days horizon Copa Holdings SA is expected to generate 0.97 times more return on investment than PennantPark Investment. However, Copa Holdings SA is 1.03 times less risky than PennantPark Investment. It trades about 0.03 of its potential returns per unit of risk. PennantPark Investment is currently generating about 0.01 per unit of risk. If you would invest  8,358  in Copa Holdings SA on December 21, 2024 and sell it today you would earn a total of  192.00  from holding Copa Holdings SA or generate 2.3% return on investment over 90 days.

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

Copa Holdings SA  vs.  PennantPark Investment

Copa Holdings SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Copa Holdings SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Copa Holdings is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

PennantPark Investment

Risk-Adjusted Performance

Weak

Over the last 90 days PennantPark Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PennantPark Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Copa Holdings and PennantPark Investment

The main advantage of trading using opposite Copa Holdings and PennantPark Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Copa Holdings position performs unexpectedly, PennantPark Investment 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 PennantPark Investment will offset losses from the drop in PennantPark Investment's long position.

The idea behind Copa Holdings SA and PennantPark Investment 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.