Correlation Between Copa Holdings and XPO Logistics

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

Diversification Opportunities for Copa Holdings and XPO Logistics

-0.34

Correlation Coefficient

Copa Holdings  XPO Logistics

Very good diversification

The 3 months correlation between Copa and XPO is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Copa Holdings SA and XPO Logistics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XPO Logistics 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 XPO Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XPO Logistics has no effect on the direction of Copa Holdings i.e., Copa Holdings and XPO Logistics go up and down completely randomly.

Pair Corralation between Copa Holdings and XPO Logistics

Considering the 90-day investment horizon Copa Holdings SA is expected to generate 0.72 times more return on investment than XPO Logistics. However, Copa Holdings SA is 1.4 times less risky than XPO Logistics. It trades about 0.07 of its potential returns per unit of risk. XPO Logistics is currently generating about -0.13 per unit of risk. If you would invest  8,459  in Copa Holdings SA on January 3, 2025 and sell it today you would earn a total of  566.00  from holding Copa Holdings SA or generate 6.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Copa Holdings SA  vs.  XPO Logistics

Copa Holdings SA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Copa Holdings SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Copa Holdings may actually be approaching a critical reversion point that can send shares even higher in May 2025.

XPO Logistics

Risk-Adjusted Performance

Very Weak

Over the last 90 days XPO Logistics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in May 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Copa Holdings and XPO Logistics

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

The idea behind Copa Holdings SA and XPO Logistics 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.