Correlation Between Empire Petroleum and Ultrapar Participacoes

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

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

Diversification Opportunities for Empire Petroleum and Ultrapar Participacoes

-0.77

Correlation Coefficient

Empire Petroleum  Ultrapar Participacoes

Pay attention - limited upside

The 3 months correlation between Empire and Ultrapar is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Empire Petroleum Corp and Ultrapar Participacoes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrapar Participacoes and Empire Petroleum 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 Empire Petroleum Corp 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 Empire Petroleum i.e., Empire Petroleum and Ultrapar Participacoes go up and down completely randomly.

Pair Corralation between Empire Petroleum and Ultrapar Participacoes

Allowing for the 90-day total investment horizon Empire Petroleum Corp is expected to generate 1.44 times more return on investment than Ultrapar Participacoes. However, Empire Petroleum is 1.44 times more volatile than Ultrapar Participacoes SA. It trades about 0.09 of its potential returns per unit of risk. Ultrapar Participacoes SA is currently generating about -0.2 per unit of risk. If you would invest  536.00  in Empire Petroleum Corp on September 20, 2024 and sell it today you would earn a total of  96.00  from holding Empire Petroleum Corp or generate 17.91% return on investment over 90 days.

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

Empire Petroleum Corp  vs.  Ultrapar Participacoes SA

Empire Petroleum Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Empire Petroleum Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Empire Petroleum reported solid returns over the last few months and may actually be approaching a breakup point.

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 uncertain performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Empire Petroleum and Ultrapar Participacoes

The main advantage of trading using opposite Empire Petroleum and Ultrapar Participacoes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire Petroleum 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 Empire Petroleum Corp 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.

Check out your portfolio center.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.