Correlation Between Copa Holdings and Universal Technical

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

Diversification Opportunities for Copa Holdings and Universal Technical

-0.21

Correlation Coefficient

Copa Holdings  Universal Technical

Very good diversification

The 3 months correlation between Copa and Universal is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Copa Holdings SA and Universal Technical Institute in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Technical 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 Universal Technical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Technical has no effect on the direction of Copa Holdings i.e., Copa Holdings and Universal Technical go up and down completely randomly.

Pair Corralation between Copa Holdings and Universal Technical

Considering the 90-day investment horizon Copa Holdings is expected to generate 37.77 times less return on investment than Universal Technical. But when comparing it to its historical volatility, Copa Holdings SA is 1.48 times less risky than Universal Technical. It trades about 0.01 of its potential returns per unit of risk. Universal Technical Institute is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,673  in Universal Technical Institute on September 15, 2024 and sell it today you would earn a total of  904.00  from holding Universal Technical Institute or generate 54.03% 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.  Universal Technical Institute

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.

Universal Technical

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Technical Institute are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Universal Technical demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Copa Holdings and Universal Technical

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

The idea behind Copa Holdings SA and Universal Technical Institute 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.