Correlation Between Cosan SA and Eneva SA

Can any of the company-specific risk be diversified away by investing in both Cosan SA and Eneva 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 Eneva 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 Eneva SA, you can compare the effects of market volatilities on Cosan SA and Eneva 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 Eneva SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cosan SA and Eneva SA.

Diversification Opportunities for Cosan SA and Eneva SA

-0.6

Correlation Coefficient

Cosan SA  Eneva SA

Excellent diversification

The 3 months correlation between Cosan and Eneva is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Cosan SA and Eneva SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eneva 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 Eneva SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eneva SA has no effect on the direction of Cosan SA i.e., Cosan SA and Eneva SA go up and down completely randomly.

Pair Corralation between Cosan SA and Eneva SA

Assuming the 90 days trading horizon Cosan SA is expected to under-perform the Eneva SA. In addition to that, Cosan SA is 1.16 times more volatile than Eneva SA. It trades about -0.02 of its total potential returns per unit of risk. Eneva SA is currently generating about 0.09 per unit of volatility. If you would invest  1,053  in Eneva SA on December 30, 2024 and sell it today you would earn a total of  137.00  from holding Eneva SA or generate 13.01% return on investment over 90 days.

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

Cosan SA  vs.  Eneva 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.

Eneva SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eneva SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Eneva SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cosan SA and Eneva SA

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

The idea behind Cosan SA and Eneva 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.