Correlation Between Copa Holdings and Union Pacific

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

Diversification Opportunities for Copa Holdings and Union Pacific

0.61

Correlation Coefficient

Copa Holdings  Union Pacific

Poor diversification

The 3 months correlation between Copa and Union is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Copa Holdings SA and Union Pacific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Pacific 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 Union Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Pacific has no effect on the direction of Copa Holdings i.e., Copa Holdings and Union Pacific go up and down completely randomly.

Pair Corralation between Copa Holdings and Union Pacific

Considering the 90-day investment horizon Copa Holdings SA is expected to generate 1.33 times more return on investment than Union Pacific. However, Copa Holdings is 1.33 times more volatile than Union Pacific. It trades about 0.11 of its potential returns per unit of risk. Union Pacific is currently generating about 0.06 per unit of risk. If you would invest  8,612  in Copa Holdings SA on December 27, 2024 and sell it today you would earn a total of  985.00  from holding Copa Holdings SA or generate 11.44% return on investment over 90 days.

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

Copa Holdings SA  vs.  Union Pacific

Copa Holdings SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Copa Holdings SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Copa Holdings may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Union Pacific

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Union Pacific are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Union Pacific is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Copa Holdings and Union Pacific

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

The idea behind Copa Holdings SA and Union Pacific 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.