Correlation Between Ultrapar Participacoes and Valvoline

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

Diversification Opportunities for Ultrapar Participacoes and Valvoline

0.66

Correlation Coefficient

Ultrapar Participacoes  Valvoline

Poor diversification

The 3 months correlation between Ultrapar and Valvoline is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Ultrapar Participacoes SA and Valvoline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valvoline 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 Valvoline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valvoline has no effect on the direction of Ultrapar Participacoes i.e., Ultrapar Participacoes and Valvoline go up and down completely randomly.

Pair Corralation between Ultrapar Participacoes and Valvoline

Considering the 90-day investment horizon Ultrapar Participacoes SA is expected to under-perform the Valvoline. In addition to that, Ultrapar Participacoes is 1.42 times more volatile than Valvoline. It trades about -0.25 of its total potential returns per unit of risk. Valvoline is currently generating about -0.06 per unit of volatility. If you would invest  4,113  in Valvoline on September 17, 2024 and sell it today you would lose (329.00) from holding Valvoline or give up 8.0% of portfolio value over 90 days.

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

Ultrapar Participacoes SA  vs.  Valvoline

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.

Valvoline

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valvoline has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Ultrapar Participacoes and Valvoline

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

The idea behind Ultrapar Participacoes SA and Valvoline 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.