Correlation Between Copa Holdings and Aker BP

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

Diversification Opportunities for Copa Holdings and Aker BP

0.62

Correlation Coefficient

Copa Holdings  Aker BP

Poor diversification

The 3 months correlation between Copa and Aker is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Copa Holdings SA and Aker BP ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aker BP ASA 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 Aker BP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aker BP ASA has no effect on the direction of Copa Holdings i.e., Copa Holdings and Aker BP go up and down completely randomly.

Pair Corralation between Copa Holdings and Aker BP

Considering the 90-day investment horizon Copa Holdings is expected to generate 1.98 times less return on investment than Aker BP. But when comparing it to its historical volatility, Copa Holdings SA is 2.19 times less risky than Aker BP. It trades about 0.11 of its potential returns per unit of risk. Aker BP ASA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  967.00  in Aker BP ASA on December 26, 2024 and sell it today you would earn a total of  209.00  from holding Aker BP ASA or generate 21.61% return on investment over 90 days.

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

Copa Holdings SA  vs.  Aker BP ASA

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 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Copa Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

Aker BP ASA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aker BP ASA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental drivers, Aker BP showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Copa Holdings and Aker BP

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

The idea behind Copa Holdings SA and Aker BP ASA 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.