Correlation Between Transocean and Copa Holdings

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

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

Diversification Opportunities for Transocean and Copa Holdings

0.34

Correlation Coefficient

Transocean  Copa Holdings

Weak diversification

The 3 months correlation between Transocean and Copa is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Transocean 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 Transocean 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 Transocean 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 Transocean i.e., Transocean and Copa Holdings go up and down completely randomly.

Pair Corralation between Transocean and Copa Holdings

Considering the 90-day investment horizon Transocean is expected to under-perform the Copa Holdings. In addition to that, Transocean is 1.26 times more volatile than Copa Holdings SA. It trades about -0.08 of its total potential returns per unit of risk. Copa Holdings SA is currently generating about -0.02 per unit of volatility. If you would invest  9,221  in Copa Holdings SA on September 26, 2024 and sell it today you would lose (358.00) from holding Copa Holdings SA or give up 3.88% of portfolio value over 90 days.

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

Transocean  vs.  Copa Holdings SA

Transocean

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transocean 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 forward 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.

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 Transocean and Copa Holdings

The main advantage of trading using opposite Transocean and Copa Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transocean 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 Transocean 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.