Correlation Between Copa Holdings and Ringmetall

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

Diversification Opportunities for Copa Holdings and Ringmetall

-0.52

Correlation Coefficient

Copa Holdings  Ringmetall

Excellent diversification

The 3 months correlation between Copa and Ringmetall is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Copa Holdings SA and Ringmetall SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ringmetall SE 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 Ringmetall. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ringmetall SE has no effect on the direction of Copa Holdings i.e., Copa Holdings and Ringmetall go up and down completely randomly.

Pair Corralation between Copa Holdings and Ringmetall

Assuming the 90 days horizon Copa Holdings is expected to generate 6.38 times less return on investment than Ringmetall. But when comparing it to its historical volatility, Copa Holdings SA is 1.6 times less risky than Ringmetall. It trades about 0.02 of its potential returns per unit of risk. Ringmetall SE is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  300.00  in Ringmetall SE on October 8, 2024 and sell it today you would earn a total of  35.00  from holding Ringmetall SE or generate 11.67% return on investment over 90 days.

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

Copa Holdings SA  vs.  Ringmetall SE

Copa Holdings SA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Copa Holdings SA are ranked lower than 1 (%) 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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Ringmetall SE

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ringmetall SE are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Ringmetall reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Copa Holdings and Ringmetall

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

The idea behind Copa Holdings SA and Ringmetall SE 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.