Correlation Between Cosan SA and Star Gas

Can any of the company-specific risk be diversified away by investing in both Cosan SA and Star Gas 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 Star Gas 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 Star Gas Partners, you can compare the effects of market volatilities on Cosan SA and Star Gas 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 Star Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cosan SA and Star Gas.

Diversification Opportunities for Cosan SA and Star Gas

-0.47

Correlation Coefficient

Cosan SA  Star Gas

Very good diversification

The 3 months correlation between Cosan and Star is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Cosan SA ADR and Star Gas Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Star Gas Partners 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 Star Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Star Gas Partners has no effect on the direction of Cosan SA i.e., Cosan SA and Star Gas go up and down completely randomly.

Pair Corralation between Cosan SA and Star Gas

Given the investment horizon of 90 days Cosan SA ADR is expected to under-perform the Star Gas. In addition to that, Cosan SA is 1.61 times more volatile than Star Gas Partners. It trades about -0.26 of its total potential returns per unit of risk. Star Gas Partners is currently generating about -0.01 per unit of volatility. If you would invest  1,196  in Star Gas Partners on September 17, 2024 and sell it today you would lose (23.00) from holding Star Gas Partners or give up 1.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Cosan SA ADR  vs.  Star Gas Partners

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

Star Gas Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Star Gas Partners has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Star Gas is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Cosan SA and Star Gas

The main advantage of trading using opposite Cosan SA and Star Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cosan SA position performs unexpectedly, Star Gas 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 Star Gas will offset losses from the drop in Star Gas' long position.

The idea behind Cosan SA ADR and Star Gas Partners 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.