Correlation Between Ultrapar Participacoes and Cosan SA

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

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

Diversification Opportunities for Ultrapar Participacoes and Cosan SA

0.69

Correlation Coefficient

Ultrapar Participacoes  Cosan SA

Poor diversification

The 3 months correlation between Ultrapar and Cosan is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Ultrapar Participacoes SA 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 Ultrapar Participacoes 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 Ultrapar Participacoes SA 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 Ultrapar Participacoes i.e., Ultrapar Participacoes and Cosan SA go up and down completely randomly.

Pair Corralation between Ultrapar Participacoes and Cosan SA

Considering the 90-day investment horizon Ultrapar Participacoes SA is expected to generate 0.71 times more return on investment than Cosan SA. However, Ultrapar Participacoes SA is 1.41 times less risky than Cosan SA. It trades about 0.06 of its potential returns per unit of risk. Cosan SA ADR is currently generating about 0.01 per unit of risk. If you would invest  277.00  in Ultrapar Participacoes SA on February 6, 2025 and sell it today you would earn a total of  21.00  from holding Ultrapar Participacoes SA or generate 7.58% return on investment over 90 days.

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

Ultrapar Participacoes SA  vs.  Cosan SA ADR

Ultrapar Participacoes

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ultrapar Participacoes SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain technical and fundamental indicators, Ultrapar Participacoes may actually be approaching a critical reversion point that can send shares even higher in June 2025.

Cosan SA ADR

Risk-Adjusted Performance

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 very healthy basic indicators, Cosan SA is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ultrapar Participacoes and Cosan SA

The main advantage of trading using opposite Ultrapar Participacoes and Cosan SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ultrapar Participacoes 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 Ultrapar Participacoes SA and Cosan SA ADR 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.