Correlation Between Copa Holdings and Spirit Airlines

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

Diversification Opportunities for Copa Holdings and Spirit Airlines

-0.24

Correlation Coefficient

Copa Holdings  Spirit Airlines

Very good diversification

The 3 months correlation between Copa and Spirit is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Copa Holdings SA and Spirit Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirit Airlines 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 Spirit Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spirit Airlines has no effect on the direction of Copa Holdings i.e., Copa Holdings and Spirit Airlines go up and down completely randomly.

Pair Corralation between Copa Holdings and Spirit Airlines

Considering the 90-day investment horizon Copa Holdings is expected to generate 1.38 times less return on investment than Spirit Airlines. But when comparing it to its historical volatility, Copa Holdings SA is 3.06 times less risky than Spirit Airlines. It trades about 0.05 of its potential returns per unit of risk. Spirit Airlines is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  376.00  in Spirit Airlines on February 29, 2024 and sell it today you would lose (4.00) from holding Spirit Airlines or give up 1.06% of portfolio value over 90 days.

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

Copa Holdings SA  vs.  Spirit Airlines

Copa Holdings SA

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Copa Holdings SA are ranked lower than 2 (%) 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.

Spirit Airlines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spirit Airlines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Copa Holdings and Spirit Airlines

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

The idea behind Copa Holdings SA and Spirit Airlines 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.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.