Correlation Between Sinopec Shanghai and Ultrapar Participacoes

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

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

Diversification Opportunities for Sinopec Shanghai and Ultrapar Participacoes

-0.01

Correlation Coefficient

Sinopec Shanghai  Ultrapar Participacoes

Good diversification

The 3 months correlation between Sinopec and Ultrapar is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Sinopec Shanghai Petrochemical and Ultrapar Participacoes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrapar Participacoes and Sinopec Shanghai 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 Sinopec Shanghai Petrochemical 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 Sinopec Shanghai i.e., Sinopec Shanghai and Ultrapar Participacoes go up and down completely randomly.

Pair Corralation between Sinopec Shanghai and Ultrapar Participacoes

Assuming the 90 days horizon Sinopec Shanghai Petrochemical is expected to generate 2.63 times more return on investment than Ultrapar Participacoes. However, Sinopec Shanghai is 2.63 times more volatile than Ultrapar Participacoes SA. It trades about 0.08 of its potential returns per unit of risk. Ultrapar Participacoes SA is currently generating about -0.24 per unit of risk. If you would invest  13.00  in Sinopec Shanghai Petrochemical on September 17, 2024 and sell it today you would earn a total of  3.00  from holding Sinopec Shanghai Petrochemical or generate 23.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Sinopec Shanghai Petrochemical  vs.  Ultrapar Participacoes SA

Sinopec Shanghai Pet

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sinopec Shanghai Petrochemical are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking indicators, Sinopec Shanghai 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 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 January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Sinopec Shanghai and Ultrapar Participacoes

The main advantage of trading using opposite Sinopec Shanghai and Ultrapar Participacoes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sinopec Shanghai 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 Sinopec Shanghai Petrochemical 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.