Correlation Between Cosan SA and Valero Energy
Can any of the company-specific risk be diversified away by investing in both Cosan SA and Valero Energy 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 Valero Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cosan SA ADR and Valero Energy, you can compare the effects of market volatilities on Cosan SA and Valero Energy 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 Valero Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cosan SA and Valero Energy.
Diversification Opportunities for Cosan SA and Valero Energy
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Cosan and Valero is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Cosan SA ADR and Valero Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valero Energy 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 ADR are associated (or correlated) with Valero Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valero Energy has no effect on the direction of Cosan SA i.e., Cosan SA and Valero Energy go up and down completely randomly.
Pair Corralation between Cosan SA and Valero Energy
Given the investment horizon of 90 days Cosan SA is expected to generate 10.29 times less return on investment than Valero Energy. In addition to that, Cosan SA is 1.35 times more volatile than Valero Energy. It trades about 0.01 of its total potential returns per unit of risk. Valero Energy is currently generating about 0.16 per unit of volatility. If you would invest 12,418 in Valero Energy on November 9, 2024 and sell it today you would earn a total of 1,011 from holding Valero Energy or generate 8.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cosan SA ADR vs. Valero Energy
Performance |
| Timeline |
| Cosan SA ADR |
| Valero Energy |
Cosan SA and Valero Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cosan SA and Valero Energy
The main advantage of trading using opposite Cosan SA and Valero Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cosan SA position performs unexpectedly, Valero Energy 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 Valero Energy will offset losses from the drop in Valero Energy's long position.| Cosan SA vs. Delek Energy | Cosan SA vs. Crossamerica Partners LP | Cosan SA vs. Par Pacific Holdings | Cosan SA vs. Valvoline |
| Valero Energy vs. Phillips 66 | Valero Energy vs. HF Sinclair Corp | Valero Energy vs. PBF Energy | Valero Energy vs. CVR Energy |
Check out your portfolio center.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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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