Correlation Between CROWN and Cosan SA

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

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

Diversification Opportunities for CROWN and Cosan SA

0.34

Correlation Coefficient

CROWN  Cosan SA

Weak diversification

The 3 months correlation between CROWN and Cosan is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding CROWN CASTLE INTL 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 CROWN 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 CROWN CASTLE INTL 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 CROWN i.e., CROWN and Cosan SA go up and down completely randomly.

Pair Corralation between CROWN and Cosan SA

Assuming the 90 days trading horizon CROWN CASTLE INTL is expected to under-perform the Cosan SA. But the bond apears to be less risky and, when comparing its historical volatility, CROWN CASTLE INTL is 3.34 times less risky than Cosan SA. The bond trades about -0.32 of its potential returns per unit of risk. The Cosan SA ADR is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  559.00  in Cosan SA ADR on October 22, 2024 and sell it today you would lose (7.00) from holding Cosan SA ADR or give up 1.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

CROWN CASTLE INTL  vs.  Cosan SA ADR

CROWN CASTLE INTL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CROWN CASTLE INTL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CROWN is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with CROWN and Cosan SA

The main advantage of trading using opposite CROWN and Cosan SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CROWN 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 CROWN CASTLE INTL 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.