Correlation Between Copa Holdings and Azul SA

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

Diversification Opportunities for Copa Holdings and Azul SA

0.04

Correlation Coefficient

Copa Holdings  Azul SA

Significant diversification

The 3 months correlation between Copa and Azul is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Copa Holdings SA and Azul SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azul SA 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 Azul SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azul SA has no effect on the direction of Copa Holdings i.e., Copa Holdings and Azul SA go up and down completely randomly.

Pair Corralation between Copa Holdings and Azul SA

Considering the 90-day investment horizon Copa Holdings is expected to generate 1.29 times less return on investment than Azul SA. But when comparing it to its historical volatility, Copa Holdings SA is 2.66 times less risky than Azul SA. It trades about 0.11 of its potential returns per unit of risk. Azul SA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  163.00  in Azul SA on December 27, 2024 and sell it today you would earn a total of  15.00  from holding Azul SA or generate 9.2% return on investment over 90 days.

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

Copa Holdings SA  vs.  Azul SA

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 8 (%) 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.

Azul SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Azul SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Azul SA disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Copa Holdings and Azul SA

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

The idea behind Copa Holdings SA and Azul SA 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.