Correlation Between Queen City and Copa Holdings

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

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

Diversification Opportunities for Queen City and Copa Holdings

0.49

Correlation Coefficient

Queen City  Copa Holdings

Very weak diversification

The 3 months correlation between Queen and Copa is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Queen City Investments 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 Queen City 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 Queen City Investments 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 Queen City i.e., Queen City and Copa Holdings go up and down completely randomly.

Pair Corralation between Queen City and Copa Holdings

Given the investment horizon of 90 days Queen City is expected to generate 2.04 times less return on investment than Copa Holdings. But when comparing it to its historical volatility, Queen City Investments is 1.12 times less risky than Copa Holdings. It trades about 0.06 of its potential returns per unit of risk. Copa Holdings SA is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  8,601  in Copa Holdings SA on December 26, 2024 and sell it today you would earn a total of  1,020  from holding Copa Holdings SA or generate 11.86% return on investment over 90 days.

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

Queen City Investments  vs.  Copa Holdings SA

Queen City Investments

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Queen City Investments are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Queen City is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

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 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Copa Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Queen City and Copa Holdings

The main advantage of trading using opposite Queen City and Copa Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Queen City 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 Queen City Investments 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.