Correlation Between BP Prudhoe and Cosan SA

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

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

Diversification Opportunities for BP Prudhoe and Cosan SA

0.24

Correlation Coefficient

BP Prudhoe  Cosan SA

Modest diversification

The 3 months correlation between BPT and Cosan is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding BP Prudhoe Bay 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 BP Prudhoe 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 BP Prudhoe Bay 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 BP Prudhoe i.e., BP Prudhoe and Cosan SA go up and down completely randomly.

Pair Corralation between BP Prudhoe and Cosan SA

Considering the 90-day investment horizon BP Prudhoe Bay is expected to generate 2.09 times more return on investment than Cosan SA. However, BP Prudhoe is 2.09 times more volatile than Cosan SA ADR. It trades about 0.02 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  60.00  in BP Prudhoe Bay on December 27, 2024 and sell it today you would lose (4.00) from holding BP Prudhoe Bay or give up 6.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

BP Prudhoe Bay  vs.  Cosan SA ADR

BP Prudhoe Bay

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BP Prudhoe Bay are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, BP Prudhoe may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 BP Prudhoe and Cosan SA

The main advantage of trading using opposite BP Prudhoe and Cosan SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BP Prudhoe 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 BP Prudhoe Bay 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.