Correlation Between Cosan SA and CVR Energy

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

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

Diversification Opportunities for Cosan SA and CVR Energy

0.22

Correlation Coefficient

Cosan SA  CVR Energy

Modest diversification

The 3 months correlation between Cosan and CVR is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Cosan SA ADR and CVR Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVR Energy and Cosan SA 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 Cosan SA ADR are associated (or correlated) with CVR Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVR Energy has no effect on the direction of Cosan SA i.e., Cosan SA and CVR Energy go up and down completely randomly.

Pair Corralation between Cosan SA and CVR Energy

Given the investment horizon of 90 days Cosan SA is expected to generate 2.85 times less return on investment than CVR Energy. In addition to that, Cosan SA is 1.15 times more volatile than CVR Energy. It trades about 0.02 of its total potential returns per unit of risk. CVR Energy is currently generating about 0.06 per unit of volatility. If you would invest  1,847  in CVR Energy on December 27, 2024 and sell it today you would earn a total of  156.00  from holding CVR Energy or generate 8.45% return on investment over 90 days.

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

Cosan SA ADR  vs.  CVR Energy

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.

CVR Energy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CVR Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, CVR Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Cosan SA and CVR Energy

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

The idea behind Cosan SA ADR and CVR Energy 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.