Correlation Between Copa Holdings and Alliance Recovery

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

Diversification Opportunities for Copa Holdings and Alliance Recovery

0.74

Correlation Coefficient

Copa Holdings  Alliance Recovery

Poor diversification

The 3 months correlation between Copa and Alliance is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Copa Holdings SA and Alliance Recovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Recovery 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 Alliance Recovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Recovery has no effect on the direction of Copa Holdings i.e., Copa Holdings and Alliance Recovery go up and down completely randomly.

Pair Corralation between Copa Holdings and Alliance Recovery

Considering the 90-day investment horizon Copa Holdings SA is expected to generate 0.28 times more return on investment than Alliance Recovery. However, Copa Holdings SA is 3.51 times less risky than Alliance Recovery. It trades about 0.02 of its potential returns per unit of risk. Alliance Recovery is currently generating about -0.02 per unit of risk. If you would invest  8,019  in Copa Holdings SA on October 25, 2024 and sell it today you would earn a total of  1,253  from holding Copa Holdings SA or generate 15.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.2%
Values	Daily Returns

Copa Holdings SA  vs.  Alliance Recovery

Copa Holdings SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Copa Holdings SA has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Alliance Recovery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alliance Recovery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Copa Holdings and Alliance Recovery

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

The idea behind Copa Holdings SA and Alliance Recovery 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.