Correlation Between Adams Resources and Cosan SA

Can any of the company-specific risk be diversified away by investing in both Adams Resources and Cosan SA 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 Adams Resources and Cosan SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Adams Resources Energy and Cosan SA ADR, you can compare the effects of market volatilities on Adams Resources and Cosan SA 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 Adams Resources with a short position of Cosan SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adams Resources and Cosan SA.

Diversification Opportunities for Adams Resources and Cosan SA

-0.3

Correlation Coefficient

Adams Resources  Cosan SA

Very good diversification

The 3 months correlation between Adams and Cosan is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Adams Resources Energy and Cosan SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cosan SA ADR and Adams Resources 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 Adams Resources Energy are associated (or correlated) with Cosan SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cosan SA ADR has no effect on the direction of Adams Resources i.e., Adams Resources and Cosan SA go up and down completely randomly.

Pair Corralation between Adams Resources and Cosan SA

Allowing for the 90-day total investment horizon Adams Resources Energy is expected to generate 0.14 times more return on investment than Cosan SA. However, Adams Resources Energy is 7.15 times less risky than Cosan SA. It trades about 0.13 of its potential returns per unit of risk. Cosan SA ADR is currently generating about 0.02 per unit of risk. If you would invest  3,735  in Adams Resources Energy on December 27, 2024 and sell it today you would earn a total of  63.00  from holding Adams Resources Energy or generate 1.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	43.33%
Values	Daily Returns

Adams Resources Energy  vs.  Cosan SA ADR

Adams Resources Energy

Risk-Adjusted Performance

OK

Over the last 90 days Adams Resources Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Adams Resources is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Cosan SA ADR

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cosan SA ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Cosan SA is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Adams Resources and Cosan SA

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

The idea behind Adams Resources Energy and Cosan SA ADR 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.