Correlation Between Cosan SA and IRPC Public

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

Diversification Opportunities for Cosan SA and IRPC Public

0.04

Correlation Coefficient

Cosan SA  IRPC Public

Significant diversification

The 3 months correlation between Cosan and IRPC is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Cosan SA ADR and IRPC Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IRPC Public 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 IRPC Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IRPC Public has no effect on the direction of Cosan SA i.e., Cosan SA and IRPC Public go up and down completely randomly.

Pair Corralation between Cosan SA and IRPC Public

Given the investment horizon of 90 days Cosan SA ADR is expected to under-perform the IRPC Public. But the stock apears to be less risky and, when comparing its historical volatility, Cosan SA ADR is 1.16 times less risky than IRPC Public. The stock trades about -0.12 of its potential returns per unit of risk. The IRPC Public is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1.75  in IRPC Public on April 30, 2025 and sell it today you would earn a total of  0.10  from holding IRPC Public or generate 5.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Cosan SA ADR  vs.  IRPC Public

Cosan SA ADR

Risk-Adjusted Performance

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

IRPC Public

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IRPC Public are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting forward indicators, IRPC Public may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Cosan SA and IRPC Public

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

The idea behind Cosan SA ADR and IRPC Public 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.