Correlation Between Ultrapar Participacoes and CVR Energy

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

Diversification Opportunities for Ultrapar Participacoes and CVR Energy

0.54

Correlation Coefficient

Ultrapar Participacoes  CVR Energy

Very weak diversification

The 3 months correlation between Ultrapar and CVR is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Ultrapar Participacoes SA and CVR Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVR Energy 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 CVR Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVR Energy has no effect on the direction of Ultrapar Participacoes i.e., Ultrapar Participacoes and CVR Energy go up and down completely randomly.

Pair Corralation between Ultrapar Participacoes and CVR Energy

Considering the 90-day investment horizon Ultrapar Participacoes SA is expected to under-perform the CVR Energy. But the stock apears to be less risky and, when comparing its historical volatility, Ultrapar Participacoes SA is 1.83 times less risky than CVR Energy. The stock trades about -0.22 of its potential returns per unit of risk. The CVR Energy is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  2,272  in CVR Energy on September 5, 2024 and sell it today you would lose (372.00) from holding CVR Energy or give up 16.37% of portfolio value over 90 days.

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

Ultrapar Participacoes SA  vs.  CVR Energy

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.

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 latest conflicting performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Ultrapar Participacoes and CVR Energy

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

The idea behind Ultrapar Participacoes SA and CVR Energy 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.