Correlation Between Cosan SA and GPS Participaes

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

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

Diversification Opportunities for Cosan SA and GPS Participaes

0.11

Correlation Coefficient

Cosan SA  GPS Participaes

Average diversification

The 3 months correlation between Cosan and GPS is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Cosan SA and GPS Participaes e in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GPS Participaes e 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 GPS Participaes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GPS Participaes e has no effect on the direction of Cosan SA i.e., Cosan SA and GPS Participaes go up and down completely randomly.

Pair Corralation between Cosan SA and GPS Participaes

Assuming the 90 days trading horizon Cosan SA is expected to under-perform the GPS Participaes. In addition to that, Cosan SA is 1.29 times more volatile than GPS Participaes e. It trades about -0.02 of its total potential returns per unit of risk. GPS Participaes e is currently generating about 0.0 per unit of volatility. If you would invest  1,398  in GPS Participaes e on December 29, 2024 and sell it today you would lose (17.00) from holding GPS Participaes e or give up 1.22% of portfolio value over 90 days.

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

Cosan SA  vs.  GPS Participaes e

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.

GPS Participaes e

Risk-Adjusted Performance

Very Weak

Over the last 90 days GPS Participaes e has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, GPS Participaes is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Cosan SA and GPS Participaes

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

The idea behind Cosan SA and GPS Participaes e 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.