Correlation Between Cosan SA and Ultrapar Participacoes

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

Diversification Opportunities for Cosan SA and Ultrapar Participacoes

0.09

Correlation Coefficient

Cosan SA  Ultrapar Participacoes

Significant diversification

The 3 months correlation between Cosan and Ultrapar is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Cosan SA ADR and Ultrapar Participacoes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrapar Participacoes 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 Ultrapar Participacoes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultrapar Participacoes has no effect on the direction of Cosan SA i.e., Cosan SA and Ultrapar Participacoes go up and down completely randomly.

Pair Corralation between Cosan SA and Ultrapar Participacoes

Given the investment horizon of 90 days Cosan SA ADR is expected to under-perform the Ultrapar Participacoes. In addition to that, Cosan SA is 1.31 times more volatile than Ultrapar Participacoes SA. It trades about -0.11 of its total potential returns per unit of risk. Ultrapar Participacoes SA is currently generating about 0.01 per unit of volatility. If you would invest  311.00  in Ultrapar Participacoes SA on May 1, 2025 and sell it today you would lose (1.00) from holding Ultrapar Participacoes SA or give up 0.32% of portfolio value over 90 days.

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

Cosan SA ADR  vs.  Ultrapar Participacoes SA

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.

Ultrapar Participacoes

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ultrapar Participacoes SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Ultrapar Participacoes is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Cosan SA and Ultrapar Participacoes

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

The idea behind Cosan SA ADR and Ultrapar Participacoes 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.