Correlation Between Copa Holdings and Royal Bank

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

Diversification Opportunities for Copa Holdings and Royal Bank

-0.27

Correlation Coefficient

Copa Holdings  Royal Bank

Very good diversification

The 3 months correlation between Copa and Royal is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Copa Holdings SA and Royal Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Bank 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 Royal Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Bank has no effect on the direction of Copa Holdings i.e., Copa Holdings and Royal Bank go up and down completely randomly.

Pair Corralation between Copa Holdings and Royal Bank

Considering the 90-day investment horizon Copa Holdings is expected to generate 1.99 times less return on investment than Royal Bank. In addition to that, Copa Holdings is 4.24 times more volatile than Royal Bank of. It trades about 0.02 of its total potential returns per unit of risk. Royal Bank of is currently generating about 0.16 per unit of volatility. If you would invest  1,537  in Royal Bank of on October 9, 2024 and sell it today you would earn a total of  282.00  from holding Royal Bank of or generate 18.35% 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.  Royal Bank of

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.

Royal Bank

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Bank of are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental drivers, Royal Bank is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Copa Holdings and Royal Bank

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

The idea behind Copa Holdings SA and Royal Bank of 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.