Correlation Between Valvoline and Ultrapar Participacoes

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

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

Diversification Opportunities for Valvoline and Ultrapar Participacoes

0.09

Correlation Coefficient

Valvoline  Ultrapar Participacoes

Significant diversification

The 3 months correlation between Valvoline and Ultrapar is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Valvoline and Ultrapar Participacoes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrapar Participacoes and Valvoline 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 Valvoline 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 Valvoline i.e., Valvoline and Ultrapar Participacoes go up and down completely randomly.

Pair Corralation between Valvoline and Ultrapar Participacoes

Considering the 90-day investment horizon Valvoline is expected to under-perform the Ultrapar Participacoes. But the stock apears to be less risky and, when comparing its historical volatility, Valvoline is 1.47 times less risky than Ultrapar Participacoes. The stock trades about -0.02 of its potential returns per unit of risk. The 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 30, 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

Valvoline  vs.  Ultrapar Participacoes SA

Valvoline

Risk-Adjusted Performance

Very Weak

Over the last 90 days Valvoline has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Valvoline is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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 Valvoline and Ultrapar Participacoes

The main advantage of trading using opposite Valvoline and Ultrapar Participacoes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valvoline 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 Valvoline 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.

Check out your portfolio center.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.