Correlation Between Tenaris SA and Ultrapar Participacoes

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

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

Diversification Opportunities for Tenaris SA and Ultrapar Participacoes

-0.08

Correlation Coefficient

Tenaris SA  Ultrapar Participacoes

Good diversification

The 3 months correlation between Tenaris and Ultrapar is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Tenaris SA ADR and Ultrapar Participacoes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrapar Participacoes and Tenaris SA 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 Tenaris SA ADR 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 Tenaris SA i.e., Tenaris SA and Ultrapar Participacoes go up and down completely randomly.

Pair Corralation between Tenaris SA and Ultrapar Participacoes

Allowing for the 90-day total investment horizon Tenaris SA ADR is expected to under-perform the Ultrapar Participacoes. But the stock apears to be less risky and, when comparing its historical volatility, Tenaris SA ADR is 2.07 times less risky than Ultrapar Participacoes. The stock trades about -0.03 of its potential returns per unit of risk. The Ultrapar Participacoes SA is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  295.00  in Ultrapar Participacoes SA on November 28, 2024 and sell it today you would lose (6.00) from holding Ultrapar Participacoes SA or give up 2.03% of portfolio value over 90 days.

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

Tenaris SA ADR  vs.  Ultrapar Participacoes SA

Tenaris SA ADR

Risk-Adjusted Performance

Very Weak

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

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 Tenaris SA and Ultrapar Participacoes

The main advantage of trading using opposite Tenaris SA and Ultrapar Participacoes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tenaris SA 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 Tenaris SA ADR 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.