Correlation Between Neste Oyj and Cosan SA
Can any of the company-specific risk be diversified away by investing in both Neste Oyj 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 Neste Oyj and Cosan SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Neste Oyj and Cosan SA ADR, you can compare the effects of market volatilities on Neste Oyj 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 Neste Oyj with a short position of Cosan SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Neste Oyj and Cosan SA.
Diversification Opportunities for Neste Oyj and Cosan SA
Poor diversification
The 3 months correlation between Neste and Cosan is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Neste Oyj 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 Neste Oyj 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 Neste Oyj 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 Neste Oyj i.e., Neste Oyj and Cosan SA go up and down completely randomly.
Pair Corralation between Neste Oyj and Cosan SA
Assuming the 90 days horizon Neste Oyj is expected to generate 1.08 times more return on investment than Cosan SA. However, Neste Oyj is 1.08 times more volatile than Cosan SA ADR. It trades about -0.11 of its potential returns per unit of risk. Cosan SA ADR is currently generating about -0.17 per unit of risk. If you would invest 1,601 in Neste Oyj on August 28, 2024 and sell it today you would lose (117.00) from holding Neste Oyj or give up 7.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Neste Oyj vs. Cosan SA ADR
Performance |
| Timeline |
| Neste Oyj |
| Cosan SA ADR |
Neste Oyj and Cosan SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Neste Oyj and Cosan SA
The main advantage of trading using opposite Neste Oyj and Cosan SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Neste Oyj 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.| Neste Oyj vs. Cosan SA ADR | Neste Oyj vs. Ultrapar Participacoes SA | Neste Oyj vs. Delek Logistics Partners | Neste Oyj vs. Sunoco LP |
| Cosan SA vs. Delek Energy | Cosan SA vs. Crossamerica Partners LP | Cosan SA vs. Par Pacific Holdings | Cosan SA vs. Valvoline |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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