Correlation Between CVR Energy and Ultrapar Participacoes

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

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

Diversification Opportunities for CVR Energy and Ultrapar Participacoes

0.55

Correlation Coefficient

CVR Energy  Ultrapar Participacoes

Very weak diversification

The 3 months correlation between CVR and Ultrapar is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding CVR Energy and Ultrapar Participacoes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrapar Participacoes and CVR Energy 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 CVR Energy 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 CVR Energy i.e., CVR Energy and Ultrapar Participacoes go up and down completely randomly.

Pair Corralation between CVR Energy and Ultrapar Participacoes

Considering the 90-day investment horizon CVR Energy is expected to generate 1.82 times more return on investment than Ultrapar Participacoes. However, CVR Energy is 1.82 times more volatile than Ultrapar Participacoes SA. It trades about -0.07 of its potential returns per unit of risk. Ultrapar Participacoes SA is currently generating about -0.19 per unit of risk. If you would invest  2,509  in CVR Energy on September 1, 2024 and sell it today you would lose (574.00) from holding CVR Energy or give up 22.88% of portfolio value over 90 days.

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

CVR Energy  vs.  Ultrapar Participacoes SA

CVR Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVR Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Ultrapar Participacoes

Risk-Adjusted Performance

0 of 100

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 inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with CVR Energy and Ultrapar Participacoes

The main advantage of trading using opposite CVR Energy and Ultrapar Participacoes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVR Energy 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 CVR Energy 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.