Correlation Between Energy Transfer and Ultrapar Participacoes

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

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

Diversification Opportunities for Energy Transfer and Ultrapar Participacoes

-0.12

Correlation Coefficient

Energy Transfer  Ultrapar Participacoes

Good diversification

The 3 months correlation between Energy and Ultrapar is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Energy Transfer LP and Ultrapar Participacoes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrapar Participacoes and Energy Transfer 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 Energy Transfer LP 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 Energy Transfer i.e., Energy Transfer and Ultrapar Participacoes go up and down completely randomly.

Pair Corralation between Energy Transfer and Ultrapar Participacoes

Allowing for the 90-day total investment horizon Energy Transfer LP is expected to under-perform the Ultrapar Participacoes. But the stock apears to be less risky and, when comparing its historical volatility, Energy Transfer LP is 1.54 times less risky than Ultrapar Participacoes. The stock trades about -0.02 of its potential returns per unit of risk. The Ultrapar Participacoes SA is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  260.00  in Ultrapar Participacoes SA on December 28, 2024 and sell it today you would earn a total of  51.00  from holding Ultrapar Participacoes SA or generate 19.62% return on investment over 90 days.

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

Energy Transfer LP  vs.  Ultrapar Participacoes SA

Energy Transfer LP

Risk-Adjusted Performance

Very Weak

Over the last 90 days Energy Transfer LP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Energy Transfer is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Ultrapar Participacoes

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ultrapar Participacoes SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain technical and fundamental indicators, Ultrapar Participacoes reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Energy Transfer and Ultrapar Participacoes

The main advantage of trading using opposite Energy Transfer and Ultrapar Participacoes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Transfer 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 Energy Transfer LP 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.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.