Correlation Between Copa Holdings and Obayashi

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

Diversification Opportunities for Copa Holdings and Obayashi

-0.59

Correlation Coefficient

Copa Holdings  Obayashi

Excellent diversification

The 3 months correlation between Copa and Obayashi is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Copa Holdings SA and Obayashi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Obayashi 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 Obayashi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Obayashi has no effect on the direction of Copa Holdings i.e., Copa Holdings and Obayashi go up and down completely randomly.

Pair Corralation between Copa Holdings and Obayashi

Considering the 90-day investment horizon Copa Holdings SA is expected to under-perform the Obayashi. But the stock apears to be less risky and, when comparing its historical volatility, Copa Holdings SA is 1.22 times less risky than Obayashi. The stock trades about -0.07 of its potential returns per unit of risk. The Obayashi is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,134  in Obayashi on October 1, 2024 and sell it today you would earn a total of  186.00  from holding Obayashi or generate 16.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.35%
Values	Daily Returns

Copa Holdings SA  vs.  Obayashi

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.

Obayashi

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Obayashi are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating fundamental indicators, Obayashi reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Copa Holdings and Obayashi

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

The idea behind Copa Holdings SA and Obayashi 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.