Correlation Between Copa Holdings and Sparta Capital

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

Diversification Opportunities for Copa Holdings and Sparta Capital

0.09

Correlation Coefficient

Copa Holdings  Sparta Capital

Significant diversification

The 3 months correlation between Copa and Sparta is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Copa Holdings SA and Sparta Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparta Capital 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 Sparta Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparta Capital has no effect on the direction of Copa Holdings i.e., Copa Holdings and Sparta Capital go up and down completely randomly.

Pair Corralation between Copa Holdings and Sparta Capital

Considering the 90-day investment horizon Copa Holdings SA is expected to generate 0.79 times more return on investment than Sparta Capital. However, Copa Holdings SA is 1.26 times less risky than Sparta Capital. It trades about 0.0 of its potential returns per unit of risk. Sparta Capital is currently generating about -0.12 per unit of risk. If you would invest  8,859  in Copa Holdings SA on September 16, 2024 and sell it today you would lose (103.00) from holding Copa Holdings SA or give up 1.16% of portfolio value over 90 days.

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

Copa Holdings SA  vs.  Sparta Capital

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.

Sparta Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sparta Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Copa Holdings and Sparta Capital

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

The idea behind Copa Holdings SA and Sparta Capital 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.