Correlation Between Brunswick and Copa Holdings

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

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

Diversification Opportunities for Brunswick and Copa Holdings

0.51

Correlation Coefficient

Brunswick  Copa Holdings

Very weak diversification

The 3 months correlation between Brunswick and Copa is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Brunswick 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 Brunswick 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 Brunswick 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 Brunswick i.e., Brunswick and Copa Holdings go up and down completely randomly.

Pair Corralation between Brunswick and Copa Holdings

Allowing for the 90-day total investment horizon Brunswick is expected to under-perform the Copa Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Brunswick is 1.35 times less risky than Copa Holdings. The stock trades about -0.82 of its potential returns per unit of risk. The Copa Holdings SA is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  9,174  in Copa Holdings SA on September 28, 2024 and sell it today you would lose (421.00) from holding Copa Holdings SA or give up 4.59% of portfolio value over 90 days.

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

Brunswick  vs.  Copa Holdings SA

Brunswick

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brunswick has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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.

Pair Trading with Brunswick and Copa Holdings

The main advantage of trading using opposite Brunswick and Copa Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brunswick 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 Brunswick 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.