Correlation Between Ultrapar Participacoes and CVR Energy

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

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

Diversification Opportunities for Ultrapar Participacoes and CVR Energy

0.4

Correlation Coefficient

Ultrapar Participacoes  CVR Energy

Very weak diversification

The 3 months correlation between Ultrapar and CVR is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Ultrapar Participacoes SA and CVR Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVR Energy and Ultrapar Participacoes 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 Ultrapar Participacoes SA are associated (or correlated) with CVR Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVR Energy has no effect on the direction of Ultrapar Participacoes i.e., Ultrapar Participacoes and CVR Energy go up and down completely randomly.

Pair Corralation between Ultrapar Participacoes and CVR Energy

Considering the 90-day investment horizon Ultrapar Participacoes SA is expected to generate 0.88 times more return on investment than CVR Energy. However, Ultrapar Participacoes SA is 1.13 times less risky than CVR Energy. It trades about 0.12 of its potential returns per unit of risk. CVR Energy is currently generating about 0.06 per unit of risk. 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 Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Ultrapar Participacoes SA  vs.  CVR Energy

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.

CVR Energy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CVR Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, CVR Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Ultrapar Participacoes and CVR Energy

The main advantage of trading using opposite Ultrapar Participacoes and CVR Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ultrapar Participacoes position performs unexpectedly, CVR Energy 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 CVR Energy will offset losses from the drop in CVR Energy's long position.

The idea behind Ultrapar Participacoes SA and CVR Energy 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.