Correlation Between Adams Resources and Ultrapar Participacoes

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

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

Diversification Opportunities for Adams Resources and Ultrapar Participacoes

-0.66

Correlation Coefficient

Adams Resources  Ultrapar Participacoes

Excellent diversification

The 3 months correlation between Adams and Ultrapar is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Adams Resources Energy and Ultrapar Participacoes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrapar Participacoes and Adams Resources 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 Adams Resources Energy 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 Adams Resources i.e., Adams Resources and Ultrapar Participacoes go up and down completely randomly.

Pair Corralation between Adams Resources and Ultrapar Participacoes

Allowing for the 90-day total investment horizon Adams Resources Energy is expected to generate 0.13 times more return on investment than Ultrapar Participacoes. However, Adams Resources Energy is 7.51 times less risky than Ultrapar Participacoes. It trades about 0.16 of its potential returns per unit of risk. Ultrapar Participacoes SA is currently generating about 0.0 per unit of risk. If you would invest  3,698  in Adams Resources Energy on November 28, 2024 and sell it today you would earn a total of  100.00  from holding Adams Resources Energy or generate 2.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	77.59%
Values	Daily Returns

Adams Resources Energy  vs.  Ultrapar Participacoes SA

Adams Resources Energy

Risk-Adjusted Performance

Good

Over the last 90 days Adams Resources Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Adams Resources is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Ultrapar Participacoes

Risk-Adjusted Performance

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 relatively invariable technical and fundamental indicators, Ultrapar Participacoes is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Adams Resources and Ultrapar Participacoes

The main advantage of trading using opposite Adams Resources and Ultrapar Participacoes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adams Resources 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 Adams Resources Energy 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 Stocks Directory module to find actively traded stocks across global markets.