Correlation Between Delek Energy and Cosan SA

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

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

Diversification Opportunities for Delek Energy and Cosan SA

0.14

Correlation Coefficient

Delek Energy  Cosan SA

Average diversification

The 3 months correlation between Delek and Cosan is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Delek Energy and Cosan SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cosan SA ADR and Delek Energy 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 Delek Energy are associated (or correlated) with Cosan SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cosan SA ADR has no effect on the direction of Delek Energy i.e., Delek Energy and Cosan SA go up and down completely randomly.

Pair Corralation between Delek Energy and Cosan SA

Allowing for the 90-day total investment horizon Delek Energy is expected to generate 0.78 times more return on investment than Cosan SA. However, Delek Energy is 1.28 times less risky than Cosan SA. It trades about 0.02 of its potential returns per unit of risk. Cosan SA ADR is currently generating about -0.13 per unit of risk. If you would invest  1,798  in Delek Energy on November 19, 2024 and sell it today you would earn a total of  27.00  from holding Delek Energy or generate 1.5% return on investment over 90 days.

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

Delek Energy  vs.  Cosan SA ADR

Delek Energy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Delek Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Delek Energy is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Cosan SA ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cosan SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Delek Energy and Cosan SA

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

The idea behind Delek Energy and Cosan SA ADR 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.