Correlation Between Copa Holdings and Affiliated Resources

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

Diversification Opportunities for Copa Holdings and Affiliated Resources

-0.15

Correlation Coefficient

Copa Holdings  Affiliated Resources

Good diversification

The 3 months correlation between Copa and Affiliated is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Copa Holdings SA and Affiliated Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Affiliated Resources Corp 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 Affiliated Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Affiliated Resources Corp has no effect on the direction of Copa Holdings i.e., Copa Holdings and Affiliated Resources go up and down completely randomly.

Pair Corralation between Copa Holdings and Affiliated Resources

Considering the 90-day investment horizon Copa Holdings SA is expected to generate 0.11 times more return on investment than Affiliated Resources. However, Copa Holdings SA is 8.94 times less risky than Affiliated Resources. It trades about 0.05 of its potential returns per unit of risk. Affiliated Resources Corp is currently generating about -0.01 per unit of risk. If you would invest  8,863  in Copa Holdings SA on December 4, 2024 and sell it today you would earn a total of  124.00  from holding Copa Holdings SA or generate 1.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Copa Holdings SA  vs.  Affiliated Resources Corp

Copa Holdings SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Copa Holdings SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Copa Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Affiliated Resources Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Affiliated Resources Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile technical and fundamental indicators, Affiliated Resources disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Copa Holdings and Affiliated Resources

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

The idea behind Copa Holdings SA and Affiliated Resources Corp 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.