Correlation Between Marfrig Global and Cosan SA

Can any of the company-specific risk be diversified away by investing in both Marfrig Global 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 Marfrig Global and Cosan SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Marfrig Global Foods and Cosan SA, you can compare the effects of market volatilities on Marfrig Global 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 Marfrig Global with a short position of Cosan SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marfrig Global and Cosan SA.

Diversification Opportunities for Marfrig Global and Cosan SA

-0.78

Correlation Coefficient

Marfrig Global  Cosan SA

Pay attention - limited upside

The 3 months correlation between Marfrig and Cosan is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Marfrig Global Foods and Cosan SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cosan SA and Marfrig Global 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 Marfrig Global Foods 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 Marfrig Global i.e., Marfrig Global and Cosan SA go up and down completely randomly.

Pair Corralation between Marfrig Global and Cosan SA

Assuming the 90 days trading horizon Marfrig Global Foods is expected to generate 0.9 times more return on investment than Cosan SA. However, Marfrig Global Foods is 1.11 times less risky than Cosan SA. It trades about 0.19 of its potential returns per unit of risk. Cosan SA is currently generating about -0.17 per unit of risk. If you would invest  1,469  in Marfrig Global Foods on September 4, 2024 and sell it today you would earn a total of  422.00  from holding Marfrig Global Foods or generate 28.73% return on investment over 90 days.

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

Marfrig Global Foods  vs.  Cosan SA

Marfrig Global Foods

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Marfrig Global Foods are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Marfrig Global unveiled solid returns over the last few months and may actually be approaching a breakup point.

Cosan SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cosan SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Marfrig Global and Cosan SA

The main advantage of trading using opposite Marfrig Global and Cosan SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marfrig Global 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.

The idea behind Marfrig Global Foods and Cosan SA 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.