Correlation Between Par Pacific and Ultrapar Participacoes

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

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

Diversification Opportunities for Par Pacific and Ultrapar Participacoes

-0.36

Correlation Coefficient

Par Pacific  Ultrapar Participacoes

Very good diversification

The 3 months correlation between Par and Ultrapar is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Par Pacific Holdings and Ultrapar Participacoes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrapar Participacoes and Par Pacific 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 Par Pacific Holdings 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 Par Pacific i.e., Par Pacific and Ultrapar Participacoes go up and down completely randomly.

Pair Corralation between Par Pacific and Ultrapar Participacoes

Given the investment horizon of 90 days Par Pacific Holdings is expected to under-perform the Ultrapar Participacoes. In addition to that, Par Pacific is 1.29 times more volatile than Ultrapar Participacoes SA. It trades about -0.02 of its total potential returns per unit of risk. Ultrapar Participacoes SA is currently generating about 0.12 per unit of volatility. If you would invest  260.00  in Ultrapar Participacoes SA on December 28, 2024 and sell it today you would earn a total of  47.50  from holding Ultrapar Participacoes SA or generate 18.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Par Pacific Holdings  vs.  Ultrapar Participacoes SA

Par Pacific Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Par Pacific Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Par Pacific is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail 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 Par Pacific and Ultrapar Participacoes

The main advantage of trading using opposite Par Pacific and Ultrapar Participacoes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Par Pacific 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 Par Pacific Holdings 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 Global Correlations module to find global opportunities by holding instruments from different markets.