Correlation Between Delek Energy and Ultrapar Participacoes

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

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

Diversification Opportunities for Delek Energy and Ultrapar Participacoes

0.37

Correlation Coefficient

Delek Energy  Ultrapar Participacoes

Weak diversification

The 3 months correlation between Delek and Ultrapar is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Delek 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 Delek Energy 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 Delek 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 Delek Energy i.e., Delek Energy and Ultrapar Participacoes go up and down completely randomly.

Pair Corralation between Delek Energy and Ultrapar Participacoes

Allowing for the 90-day total investment horizon Delek Energy is expected to generate 1.19 times more return on investment than Ultrapar Participacoes. However, Delek Energy is 1.19 times more volatile than Ultrapar Participacoes SA. It trades about -0.01 of its potential returns per unit of risk. Ultrapar Participacoes SA is currently generating about -0.19 per unit of risk. If you would invest  2,013  in Delek Energy on August 30, 2024 and sell it today you would lose (97.00) from holding Delek Energy or give up 4.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Delek Energy  vs.  Ultrapar Participacoes SA

Delek Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Delek Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Delek Energy is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

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 December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Delek Energy and Ultrapar Participacoes

The main advantage of trading using opposite Delek Energy and Ultrapar Participacoes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delek Energy 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 Delek 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.