Correlation Between Copa Holdings and Gol Linhas

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

Diversification Opportunities for Copa Holdings and Gol Linhas

-0.02

Correlation Coefficient

Copa Holdings  Gol Linhas

Good diversification

The 3 months correlation between Copa and Gol is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Copa Holdings SA and Gol Linhas Aereas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gol Linhas Aereas 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 Gol Linhas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gol Linhas Aereas has no effect on the direction of Copa Holdings i.e., Copa Holdings and Gol Linhas go up and down completely randomly.

Pair Corralation between Copa Holdings and Gol Linhas

Considering the 90-day investment horizon Copa Holdings SA is expected to generate 0.34 times more return on investment than Gol Linhas. However, Copa Holdings SA is 2.91 times less risky than Gol Linhas. It trades about 0.04 of its potential returns per unit of risk. Gol Linhas Aereas is currently generating about -0.03 per unit of risk. If you would invest  8,084  in Copa Holdings SA on January 31, 2024 and sell it today you would earn a total of  1,769  from holding Copa Holdings SA or generate 21.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	82.37%
Values	Daily Returns

Copa Holdings SA  vs.  Gol Linhas Aereas

Copa Holdings SA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Copa Holdings SA are ranked lower than 3 (%) 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Gol Linhas Aereas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gol Linhas Aereas 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 basic indicators remain quite persistent which may send shares a bit higher in May 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Copa Holdings and Gol Linhas

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

The idea behind Copa Holdings SA and Gol Linhas Aereas 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.