Correlation Between Ultrapar Participacoes and Delek Energy

Can any of the company-specific risk be diversified away by investing in both Ultrapar Participacoes and Delek 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 Delek 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 Delek Energy, you can compare the effects of market volatilities on Ultrapar Participacoes and Delek 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 Delek Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultrapar Participacoes and Delek Energy.

Diversification Opportunities for Ultrapar Participacoes and Delek Energy

-0.21

Correlation Coefficient

Ultrapar Participacoes  Delek Energy

Very good diversification

The 3 months correlation between Ultrapar and Delek is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Ultrapar Participacoes SA and Delek Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delek 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 Delek Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delek Energy has no effect on the direction of Ultrapar Participacoes i.e., Ultrapar Participacoes and Delek Energy go up and down completely randomly.

Pair Corralation between Ultrapar Participacoes and Delek Energy

Considering the 90-day investment horizon Ultrapar Participacoes SA is expected to generate 0.82 times more return on investment than Delek Energy. However, Ultrapar Participacoes SA is 1.23 times less risky than Delek Energy. It trades about 0.12 of its potential returns per unit of risk. Delek Energy is currently generating about -0.03 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  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

Ultrapar Participacoes SA  vs.  Delek 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.

Delek Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Delek Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Delek Energy is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Ultrapar Participacoes and Delek Energy

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

The idea behind Ultrapar Participacoes SA and Delek 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.