Correlation Between Smith Douglas and Copa Holdings

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

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

Diversification Opportunities for Smith Douglas and Copa Holdings

-0.33

Correlation Coefficient

Smith Douglas  Copa Holdings

Very good diversification

The 3 months correlation between Smith and Copa is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Smith Douglas Homes 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 Smith Douglas 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 Smith Douglas Homes 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 Smith Douglas i.e., Smith Douglas and Copa Holdings go up and down completely randomly.

Pair Corralation between Smith Douglas and Copa Holdings

Given the investment horizon of 90 days Smith Douglas Homes is expected to generate 1.65 times more return on investment than Copa Holdings. However, Smith Douglas is 1.65 times more volatile than Copa Holdings SA. It trades about 0.06 of its potential returns per unit of risk. Copa Holdings SA is currently generating about 0.01 per unit of risk. If you would invest  2,400  in Smith Douglas Homes on September 12, 2024 and sell it today you would earn a total of  858.50  from holding Smith Douglas Homes or generate 35.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	70.09%
Values	Daily Returns

Smith Douglas Homes  vs.  Copa Holdings SA

Smith Douglas Homes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smith Douglas Homes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Copa Holdings SA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Copa Holdings SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Copa Holdings is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Smith Douglas and Copa Holdings

The main advantage of trading using opposite Smith Douglas and Copa Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smith Douglas 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 Smith Douglas Homes 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .