Correlation Between Ultrapar Participacoes and Star Gas

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

Diversification Opportunities for Ultrapar Participacoes and Star Gas

0.77

Correlation Coefficient

Ultrapar Participacoes  Star Gas

Poor diversification

The 3 months correlation between Ultrapar and Star is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Ultrapar Participacoes SA and Star Gas Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Star Gas Partners 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 Star Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Star Gas Partners has no effect on the direction of Ultrapar Participacoes i.e., Ultrapar Participacoes and Star Gas go up and down completely randomly.

Pair Corralation between Ultrapar Participacoes and Star Gas

Considering the 90-day investment horizon Ultrapar Participacoes SA is expected to generate 1.73 times more return on investment than Star Gas. However, Ultrapar Participacoes is 1.73 times more volatile than Star Gas Partners. It trades about 0.12 of its potential returns per unit of risk. Star Gas Partners is currently generating about 0.15 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 Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Ultrapar Participacoes SA  vs.  Star Gas Partners

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.

Star Gas Partners

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Star Gas Partners are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Star Gas unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ultrapar Participacoes and Star Gas

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

The idea behind Ultrapar Participacoes SA and Star Gas Partners 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.