Correlation Between Basic Materials and Cosan SA
Can any of the company-specific risk be diversified away by investing in both Basic Materials 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 Basic Materials and Cosan SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Materials and Cosan SA, you can compare the effects of market volatilities on Basic Materials 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 Basic Materials with a short position of Cosan SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and Cosan SA.
Diversification Opportunities for Basic Materials and Cosan SA
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Basic and Cosan is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials and Cosan SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cosan SA and Basic Materials 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 Basic Materials 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 Basic Materials i.e., Basic Materials and Cosan SA go up and down completely randomly.
Pair Corralation between Basic Materials and Cosan SA
Assuming the 90 days trading horizon Basic Materials is expected to generate 0.38 times more return on investment than Cosan SA. However, Basic Materials is 2.63 times less risky than Cosan SA. It trades about 0.01 of its potential returns per unit of risk. Cosan SA is currently generating about -0.16 per unit of risk. If you would invest 577,003 in Basic Materials on August 27, 2024 and sell it today you would earn a total of 1,099 from holding Basic Materials or generate 0.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Basic Materials vs. Cosan SA
Performance |
| Timeline |
Basic Materials and Cosan SA Volatility Contrast
Predicted Return Density |
| Returns |
Basic Materials
Pair trading matchups for Basic Materials
Cosan SA
Pair trading matchups for Cosan SA
Pair Trading with Basic Materials and Cosan SA
The main advantage of trading using opposite Basic Materials and Cosan SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials 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.| Basic Materials vs. Credit Acceptance | Basic Materials vs. Capital One Financial | Basic Materials vs. Paycom Software | Basic Materials vs. Mitsubishi UFJ Financial |
| Cosan SA vs. Mitsubishi UFJ Financial | Cosan SA vs. Sumitomo Mitsui Financial | Cosan SA vs. Toyota Motor | Cosan SA vs. Banco Santander Chile |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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