Correlation Between PBF Energy and Cosan SA

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

Diversification Opportunities for PBF Energy and Cosan SA

0.4

Correlation Coefficient

PBF Energy  Cosan SA

Very weak diversification

The 3 months correlation between PBF and Cosan is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding PBF 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 PBF 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 PBF 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 PBF Energy i.e., PBF Energy and Cosan SA go up and down completely randomly.

Pair Corralation between PBF Energy and Cosan SA

Considering the 90-day investment horizon PBF Energy is expected to generate 0.73 times more return on investment than Cosan SA. However, PBF Energy is 1.37 times less risky than Cosan SA. It trades about 0.2 of its potential returns per unit of risk. Cosan SA ADR is currently generating about -0.14 per unit of risk. If you would invest  2,881  in PBF Energy on August 30, 2024 and sell it today you would earn a total of  258.00  from holding PBF Energy or generate 8.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

PBF Energy  vs.  Cosan SA ADR

PBF Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PBF Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, PBF Energy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Cosan SA ADR

Risk-Adjusted Performance

0 of 100

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 December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with PBF Energy and Cosan SA

The main advantage of trading using opposite PBF Energy and Cosan SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PBF 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 PBF 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.