Correlation Between Copa Holdings and Aspen Digital

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

Diversification Opportunities for Copa Holdings and Aspen Digital

-0.63

Correlation Coefficient

Copa Holdings  Aspen Digital

Excellent diversification

The 3 months correlation between Copa and Aspen is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Copa Holdings SA and Aspen Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aspen Digital 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 Aspen Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aspen Digital has no effect on the direction of Copa Holdings i.e., Copa Holdings and Aspen Digital go up and down completely randomly.

Pair Corralation between Copa Holdings and Aspen Digital

Considering the 90-day investment horizon Copa Holdings SA is expected to generate 1.73 times more return on investment than Aspen Digital. However, Copa Holdings is 1.73 times more volatile than Aspen Digital. It trades about 0.11 of its potential returns per unit of risk. Aspen Digital is currently generating about -0.18 per unit of risk. If you would invest  8,601  in Copa Holdings SA on December 26, 2024 and sell it today you would earn a total of  1,020  from holding Copa Holdings SA or generate 11.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.77%
Values	Daily Returns

Copa Holdings SA  vs.  Aspen Digital

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.

Aspen Digital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aspen Digital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Copa Holdings and Aspen Digital

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

The idea behind Copa Holdings SA and Aspen Digital 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.