Correlation Between Cosan SA and Auren Energia

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

By analyzing existing cross correlation between Cosan SA and Auren Energia SA, you can compare the effects of market volatilities on Cosan SA and Auren Energia 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 Auren Energia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cosan SA and Auren Energia.

Diversification Opportunities for Cosan SA and Auren Energia

0.92

Correlation Coefficient

Cosan SA  Auren Energia

Almost no diversification

The 3 months correlation between Cosan and Auren is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Cosan SA and Auren Energia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auren Energia SA 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 are associated (or correlated) with Auren Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auren Energia SA has no effect on the direction of Cosan SA i.e., Cosan SA and Auren Energia go up and down completely randomly.

Pair Corralation between Cosan SA and Auren Energia

Assuming the 90 days trading horizon Cosan SA is expected to under-perform the Auren Energia. But the stock apears to be less risky and, when comparing its historical volatility, Cosan SA is 55.1 times less risky than Auren Energia. The stock trades about -0.16 of its potential returns per unit of risk. The Auren Energia SA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,290  in Auren Energia SA on October 9, 2024 and sell it today you would lose (448.00) from holding Auren Energia SA or give up 34.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.6%
Values	Daily Returns

Cosan SA  vs.  Auren Energia SA

Cosan SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cosan SA 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 comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Auren Energia SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Auren Energia SA 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 comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Cosan SA and Auren Energia

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

The idea behind Cosan SA and Auren Energia SA 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.