Correlation Between Ultrapar Participacoes and PBF Energy

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

Diversification Opportunities for Ultrapar Participacoes and PBF Energy

0.17

Correlation Coefficient

Ultrapar Participacoes  PBF Energy

Average diversification

The 3 months correlation between Ultrapar and PBF is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Ultrapar Participacoes SA and PBF Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PBF 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 PBF Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PBF Energy has no effect on the direction of Ultrapar Participacoes i.e., Ultrapar Participacoes and PBF Energy go up and down completely randomly.

Pair Corralation between Ultrapar Participacoes and PBF Energy

Considering the 90-day investment horizon Ultrapar Participacoes SA is expected to under-perform the PBF Energy. In addition to that, Ultrapar Participacoes is 1.17 times more volatile than PBF Energy. It trades about -0.39 of its total potential returns per unit of risk. PBF Energy is currently generating about 0.28 per unit of volatility. If you would invest  2,809  in PBF Energy on September 5, 2024 and sell it today you would earn a total of  379.00  from holding PBF Energy or generate 13.49% return on investment over 90 days.

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

Ultrapar Participacoes SA  vs.  PBF 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.

PBF Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PBF Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, PBF Energy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ultrapar Participacoes and PBF Energy

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

The idea behind Ultrapar Participacoes SA and PBF 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.