Correlation Between Copa Holdings and Gentex

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

Diversification Opportunities for Copa Holdings and Gentex

0.25

Correlation Coefficient

Copa Holdings  Gentex

Modest diversification

The 3 months correlation between Copa and Gentex is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Copa Holdings SA and Gentex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gentex 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 Gentex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gentex has no effect on the direction of Copa Holdings i.e., Copa Holdings and Gentex go up and down completely randomly.

Pair Corralation between Copa Holdings and Gentex

Considering the 90-day investment horizon Copa Holdings SA is expected to generate 2.05 times more return on investment than Gentex. However, Copa Holdings is 2.05 times more volatile than Gentex. It trades about 0.03 of its potential returns per unit of risk. Gentex is currently generating about -0.75 per unit of risk. If you would invest  8,852  in Copa Holdings SA on October 11, 2024 and sell it today you would earn a total of  85.00  from holding Copa Holdings SA or generate 0.96% return on investment over 90 days.

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

Copa Holdings SA  vs.  Gentex

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.

Gentex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gentex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Copa Holdings and Gentex

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

The idea behind Copa Holdings SA and Gentex 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.