Correlation Between Copa Holdings and AirAsia Group

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

Diversification Opportunities for Copa Holdings and AirAsia Group

-0.48

Correlation Coefficient

Copa Holdings  AirAsia Group

Very good diversification

The 3 months correlation between Copa and AirAsia is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Copa Holdings SA and AirAsia Group Berhad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AirAsia Group Berhad 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 AirAsia Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AirAsia Group Berhad has no effect on the direction of Copa Holdings i.e., Copa Holdings and AirAsia Group go up and down completely randomly.

Pair Corralation between Copa Holdings and AirAsia Group

Considering the 90-day investment horizon Copa Holdings SA is expected to generate 0.31 times more return on investment than AirAsia Group. However, Copa Holdings SA is 3.18 times less risky than AirAsia Group. It trades about 0.07 of its potential returns per unit of risk. AirAsia Group Berhad is currently generating about -0.14 per unit of risk. If you would invest  9,202  in Copa Holdings SA on December 28, 2024 and sell it today you would earn a total of  214.00  from holding Copa Holdings SA or generate 2.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Copa Holdings SA  vs.  AirAsia Group Berhad

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 7 (%) 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.

AirAsia Group Berhad

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AirAsia Group Berhad are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental drivers, AirAsia Group may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Copa Holdings and AirAsia Group

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

The idea behind Copa Holdings SA and AirAsia Group Berhad 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.