Correlation Between Gafisa SA and Cosan SA
Can any of the company-specific risk be diversified away by investing in both Gafisa SA 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 Gafisa SA and Cosan SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gafisa SA and Cosan SA, you can compare the effects of market volatilities on Gafisa SA 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 Gafisa SA with a short position of Cosan SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gafisa SA and Cosan SA.
Diversification Opportunities for Gafisa SA and Cosan SA
Very poor diversification
The 3 months correlation between Gafisa and Cosan is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Gafisa SA and Cosan SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cosan SA and Gafisa 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 Gafisa SA 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 has no effect on the direction of Gafisa SA i.e., Gafisa SA and Cosan SA go up and down completely randomly.
Pair Corralation between Gafisa SA and Cosan SA
Assuming the 90 days trading horizon Gafisa SA is expected to generate 1.73 times more return on investment than Cosan SA. However, Gafisa SA is 1.73 times more volatile than Cosan SA. It trades about -0.06 of its potential returns per unit of risk. Cosan SA is currently generating about -0.27 per unit of risk. If you would invest 147.00 in Gafisa SA on September 14, 2024 and sell it today you would lose (16.00) from holding Gafisa SA or give up 10.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gafisa SA vs. Cosan SA
Performance |
| Timeline |
| Gafisa SA |
| Cosan SA |
Gafisa SA and Cosan SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gafisa SA and Cosan SA
The main advantage of trading using opposite Gafisa SA and Cosan SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gafisa SA 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.| Gafisa SA vs. Tupy SA | Gafisa SA vs. Engie Brasil Energia | Gafisa SA vs. Grendene SA | Gafisa SA vs. M Dias Branco |
| Cosan SA vs. PDG Realty SA | Cosan SA vs. Positivo Tecnologia SA | Cosan SA vs. Rossi Residencial SA | Cosan SA vs. Gafisa SA |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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