Correlation Between Copa Holdings and ENEL Societa

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

Diversification Opportunities for Copa Holdings and ENEL Societa

0.64

Correlation Coefficient

Copa Holdings  ENEL Societa

Poor diversification

The 3 months correlation between Copa and ENEL is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Copa Holdings SA and ENEL Societa per in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENEL Societa per 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 ENEL Societa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENEL Societa per has no effect on the direction of Copa Holdings i.e., Copa Holdings and ENEL Societa go up and down completely randomly.

Pair Corralation between Copa Holdings and ENEL Societa

Considering the 90-day investment horizon Copa Holdings is expected to generate 1.06 times less return on investment than ENEL Societa. In addition to that, Copa Holdings is 1.55 times more volatile than ENEL Societa per. It trades about 0.11 of its total potential returns per unit of risk. ENEL Societa per is currently generating about 0.18 per unit of volatility. If you would invest  686.00  in ENEL Societa per on December 26, 2024 and sell it today you would earn a total of  89.00  from holding ENEL Societa per or generate 12.97% 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.  ENEL Societa per

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.

ENEL Societa per

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ENEL Societa per are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, ENEL Societa showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Copa Holdings and ENEL Societa

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

The idea behind Copa Holdings SA and ENEL Societa per 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.