Correlation Between Phillips and Ultrapar Participacoes

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

By analyzing existing cross correlation between Phillips 66 and Ultrapar Participacoes SA, you can compare the effects of market volatilities on Phillips 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 Phillips with a short position of Ultrapar Participacoes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Phillips and Ultrapar Participacoes.

Diversification Opportunities for Phillips and Ultrapar Participacoes

0.78

Correlation Coefficient

Phillips  Ultrapar Participacoes

Poor diversification

The 3 months correlation between Phillips and Ultrapar is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Phillips 66 and Ultrapar Participacoes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrapar Participacoes and Phillips 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 Phillips 66 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 Phillips i.e., Phillips and Ultrapar Participacoes go up and down completely randomly.

Pair Corralation between Phillips and Ultrapar Participacoes

Considering the 90-day investment horizon Phillips is expected to generate 1.94 times less return on investment than Ultrapar Participacoes. But when comparing it to its historical volatility, Phillips 66 is 1.43 times less risky than Ultrapar Participacoes. It trades about 0.09 of its potential returns per unit of risk. 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 29, 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 Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Phillips 66  vs.  Ultrapar Participacoes SA

Phillips 66

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Phillips 66 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Phillips may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 Phillips and Ultrapar Participacoes

The main advantage of trading using opposite Phillips and Ultrapar Participacoes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Phillips 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 Phillips 66 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.