Correlation Between Copa Holdings and Foremost Lithium

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

Diversification Opportunities for Copa Holdings and Foremost Lithium

-0.6

Correlation Coefficient

Copa Holdings  Foremost Lithium

Excellent diversification

The 3 months correlation between Copa and Foremost is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Copa Holdings SA and Foremost Lithium Resource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foremost Lithium Resource 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 Foremost Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foremost Lithium Resource has no effect on the direction of Copa Holdings i.e., Copa Holdings and Foremost Lithium go up and down completely randomly.

Pair Corralation between Copa Holdings and Foremost Lithium

Considering the 90-day investment horizon Copa Holdings SA is expected to generate 0.12 times more return on investment than Foremost Lithium. However, Copa Holdings SA is 8.14 times less risky than Foremost Lithium. It trades about 0.08 of its potential returns per unit of risk. Foremost Lithium Resource is currently generating about -0.02 per unit of risk. If you would invest  8,706  in Copa Holdings SA on December 19, 2024 and sell it today you would earn a total of  660.00  from holding Copa Holdings SA or generate 7.58% return on investment over 90 days.

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

Copa Holdings SA  vs.  Foremost Lithium Resource

Copa Holdings SA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Copa Holdings SA are ranked lower than 6 (%) 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.

Foremost Lithium Resource

Risk-Adjusted Performance

Very Weak

Over the last 90 days Foremost Lithium Resource has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Copa Holdings and Foremost Lithium

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

The idea behind Copa Holdings SA and Foremost Lithium Resource 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.