Correlation Between Copa Holdings and KKRS

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

Diversification Opportunities for Copa Holdings and KKRS

0.04

Correlation Coefficient

Copa Holdings  KKRS

Significant diversification

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

Pair Corralation between Copa Holdings and KKRS

Considering the 90-day investment horizon Copa Holdings is expected to generate 1.25 times less return on investment than KKRS. In addition to that, Copa Holdings is 1.64 times more volatile than KKRS. It trades about 0.02 of its total potential returns per unit of risk. KKRS is currently generating about 0.05 per unit of volatility. If you would invest  1,481  in KKRS on September 20, 2024 and sell it today you would earn a total of  443.00  from holding KKRS or generate 29.91% 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.  KKRS

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.

KKRS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KKRS 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 stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Copa Holdings and KKRS

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

The idea behind Copa Holdings SA and KKRS 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.