Correlation Between Cosan SA and B3 SA

Can any of the company-specific risk be diversified away by investing in both Cosan SA and B3 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 Cosan SA and B3 SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cosan SA and B3 SA , you can compare the effects of market volatilities on Cosan SA and B3 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 Cosan SA with a short position of B3 SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cosan SA and B3 SA.

Diversification Opportunities for Cosan SA and B3 SA

-0.4

Correlation Coefficient

Cosan SA  B3 SA

Very good diversification

The 3 months correlation between Cosan and B3SA3 is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Cosan SA and B3 SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on B3 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 B3 SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of B3 SA has no effect on the direction of Cosan SA i.e., Cosan SA and B3 SA go up and down completely randomly.

Pair Corralation between Cosan SA and B3 SA

Assuming the 90 days trading horizon Cosan SA is expected to under-perform the B3 SA. In addition to that, Cosan SA is 1.04 times more volatile than B3 SA . It trades about -0.02 of its total potential returns per unit of risk. B3 SA is currently generating about 0.13 per unit of volatility. If you would invest  1,026  in B3 SA on December 28, 2024 and sell it today you would earn a total of  214.00  from holding B3 SA or generate 20.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.67%
Values	Daily Returns

Cosan SA  vs.  B3 SA

Cosan SA

Risk-Adjusted Performance

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 comparatively stable basic indicators, Cosan SA is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

B3 SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in B3 SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, B3 SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cosan SA and B3 SA

The main advantage of trading using opposite Cosan SA and B3 SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cosan SA position performs unexpectedly, B3 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 B3 SA will offset losses from the drop in B3 SA's long position.

The idea behind Cosan SA and B3 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.