Correlation Between Grindrod and Copa Holdings

Can any of the company-specific risk be diversified away by investing in both Grindrod and Copa Holdings 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 Grindrod and Copa Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Grindrod Ltd ADR and Copa Holdings SA, you can compare the effects of market volatilities on Grindrod and Copa Holdings 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 Grindrod with a short position of Copa Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grindrod and Copa Holdings.

Diversification Opportunities for Grindrod and Copa Holdings

0.53

Correlation Coefficient

Grindrod  Copa Holdings

Very weak diversification

The 3 months correlation between Grindrod and Copa is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Grindrod Ltd ADR and Copa Holdings SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Copa Holdings SA and Grindrod 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 Grindrod Ltd ADR are associated (or correlated) with Copa Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Copa Holdings SA has no effect on the direction of Grindrod i.e., Grindrod and Copa Holdings go up and down completely randomly.

Pair Corralation between Grindrod and Copa Holdings

Assuming the 90 days horizon Grindrod Ltd ADR is expected to generate 0.05 times more return on investment than Copa Holdings. However, Grindrod Ltd ADR is 20.51 times less risky than Copa Holdings. It trades about 0.09 of its potential returns per unit of risk. Copa Holdings SA is currently generating about -0.02 per unit of risk. If you would invest  1,749  in Grindrod Ltd ADR on September 13, 2024 and sell it today you would earn a total of  51.00  from holding Grindrod Ltd ADR or generate 2.92% return on investment over 90 days.

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

Grindrod Ltd ADR  vs.  Copa Holdings SA

Grindrod ADR

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Grindrod Ltd ADR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Grindrod is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Copa Holdings SA

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Copa Holdings SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Grindrod and Copa Holdings

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

The idea behind Grindrod Ltd ADR and Copa Holdings SA 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.