Correlation Between Natura Co and Cogna Educao

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

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

Diversification Opportunities for Natura Co and Cogna Educao

-0.45

Correlation Coefficient

Natura Co  Cogna Educao

Very good diversification

The 3 months correlation between Natura and Cogna is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Natura Co Holding and Cogna Educao SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogna Educao SA and Natura Co 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 Natura Co Holding are associated (or correlated) with Cogna Educao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cogna Educao SA has no effect on the direction of Natura Co i.e., Natura Co and Cogna Educao go up and down completely randomly.

Pair Corralation between Natura Co and Cogna Educao

Assuming the 90 days trading horizon Natura Co Holding is expected to under-perform the Cogna Educao. In addition to that, Natura Co is 1.5 times more volatile than Cogna Educao SA. It trades about -0.04 of its total potential returns per unit of risk. Cogna Educao SA is currently generating about 0.37 per unit of volatility. If you would invest  109.00  in Cogna Educao SA on December 30, 2024 and sell it today you would earn a total of  103.00  from holding Cogna Educao SA or generate 94.5% return on investment over 90 days.

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

Natura Co Holding  vs.  Cogna Educao SA

Natura Co Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Natura Co Holding 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 April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Cogna Educao SA

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Cogna Educao SA are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Cogna Educao unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Natura Co and Cogna Educao

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

The idea behind Natura Co Holding and Cogna Educao 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.