Correlation Between Southwest Airlines and Copa Holdings
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines 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 Southwest Airlines and Copa Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southwest Airlines and Copa Holdings SA, you can compare the effects of market volatilities on Southwest Airlines 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 Southwest Airlines with a short position of Copa Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Copa Holdings.
Diversification Opportunities for Southwest Airlines and Copa Holdings
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Southwest and Copa is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines 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 Southwest Airlines 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 Southwest Airlines 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 Southwest Airlines i.e., Southwest Airlines and Copa Holdings go up and down completely randomly.
Pair Corralation between Southwest Airlines and Copa Holdings
Considering the 90-day investment horizon Southwest Airlines is expected to generate 0.93 times more return on investment than Copa Holdings. However, Southwest Airlines is 1.08 times less risky than Copa Holdings. It trades about -0.01 of its potential returns per unit of risk. Copa Holdings SA is currently generating about -0.17 per unit of risk. If you would invest 2,801 in Southwest Airlines on January 17, 2024 and sell it today you would lose (17.00) from holding Southwest Airlines or give up 0.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Southwest Airlines vs. Copa Holdings SA
Performance |
| Timeline |
| Southwest Airlines |
| Copa Holdings SA |
Southwest Airlines and Copa Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Copa Holdings
The main advantage of trading using opposite Southwest Airlines and Copa Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines 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.| Southwest Airlines vs. United Airlines Holdings | Southwest Airlines vs. American Airlines Group | Southwest Airlines vs. JetBlue Airways Corp | Southwest Airlines vs. Spirit Airlines |
| Copa Holdings vs. SkyWest | Copa Holdings vs. Sun Country Airlines | Copa Holdings vs. Air Transport Services | Copa Holdings vs. Frontier Group Holdings |
Check out your portfolio center.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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
Other Complementary Tools
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets |