Correlation Between Delta Air and Copa Holdings

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

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

Diversification Opportunities for Delta Air and Copa Holdings

0.75

Correlation Coefficient

Delta Air  Copa Holdings

Poor diversification

The 3 months correlation between Delta and Copa is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines 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 Delta Air 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 Delta Air Lines 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 Delta Air i.e., Delta Air and Copa Holdings go up and down completely randomly.

Pair Corralation between Delta Air and Copa Holdings

Considering the 90-day investment horizon Delta Air Lines is expected to generate 0.83 times more return on investment than Copa Holdings. However, Delta Air Lines is 1.21 times less risky than Copa Holdings. It trades about 0.14 of its potential returns per unit of risk. Copa Holdings SA is currently generating about -0.13 per unit of risk. If you would invest  4,538  in Delta Air Lines on January 20, 2024 and sell it today you would earn a total of  219.00  from holding Delta Air Lines or generate 4.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Delta Air Lines  vs.  Copa Holdings SA

Delta Air Lines

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Air Lines are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Delta Air disclosed solid returns over the last few months and may actually be approaching a breakup point.

Copa Holdings SA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Copa Holdings SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Copa Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Delta Air and Copa Holdings

The main advantage of trading using opposite Delta Air and Copa Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delta Air 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 Delta Air Lines 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.