Correlation Between Copa Holdings and NETGEAR

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

Diversification Opportunities for Copa Holdings and NETGEAR

-0.22

Correlation Coefficient

Copa Holdings  NETGEAR

Very good diversification

The 3 months correlation between Copa and NETGEAR is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Copa Holdings SA and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR 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 NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of Copa Holdings i.e., Copa Holdings and NETGEAR go up and down completely randomly.

Pair Corralation between Copa Holdings and NETGEAR

Considering the 90-day investment horizon Copa Holdings SA is expected to under-perform the NETGEAR. In addition to that, Copa Holdings is 1.21 times more volatile than NETGEAR. It trades about -0.08 of its total potential returns per unit of risk. NETGEAR is currently generating about 0.26 per unit of volatility. If you would invest  2,119  in NETGEAR on September 21, 2024 and sell it today you would earn a total of  552.00  from holding NETGEAR or generate 26.05% return on investment over 90 days.

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

Copa Holdings SA  vs.  NETGEAR

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.

NETGEAR

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Copa Holdings and NETGEAR

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

The idea behind Copa Holdings SA and NETGEAR 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.