Correlation Between Copa Holdings and Japan Asia

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

Diversification Opportunities for Copa Holdings and Japan Asia

-0.32

Correlation Coefficient

Copa Holdings  Japan Asia

Very good diversification

The 3 months correlation between Copa and Japan is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Copa Holdings SA and Japan Asia Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Asia Investment 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 Japan Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Asia Investment has no effect on the direction of Copa Holdings i.e., Copa Holdings and Japan Asia go up and down completely randomly.

Pair Corralation between Copa Holdings and Japan Asia

Assuming the 90 days horizon Copa Holdings SA is expected to generate 0.66 times more return on investment than Japan Asia. However, Copa Holdings SA is 1.51 times less risky than Japan Asia. It trades about 0.03 of its potential returns per unit of risk. Japan Asia Investment is currently generating about 0.0 per unit of risk. If you would invest  6,923  in Copa Holdings SA on September 14, 2024 and sell it today you would earn a total of  1,477  from holding Copa Holdings SA or generate 21.33% 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.  Japan Asia Investment

Copa Holdings SA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Copa Holdings SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Copa Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Japan Asia Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Japan Asia Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Japan Asia is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Copa Holdings and Japan Asia

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

The idea behind Copa Holdings SA and Japan Asia Investment 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.