Correlation Between Par Pacific and Ultrapar Participacoes
Can any of the company-specific risk be diversified away by investing in both Par Pacific 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 Par Pacific and Ultrapar Participacoes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Par Pacific Holdings and Ultrapar Participacoes SA, you can compare the effects of market volatilities on Par Pacific 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 Par Pacific with a short position of Ultrapar Participacoes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Par Pacific and Ultrapar Participacoes.
Diversification Opportunities for Par Pacific and Ultrapar Participacoes
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Par and Ultrapar is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Par Pacific Holdings and Ultrapar Participacoes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrapar Participacoes and Par Pacific 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 Par Pacific Holdings 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 Par Pacific i.e., Par Pacific and Ultrapar Participacoes go up and down completely randomly.
Pair Corralation between Par Pacific and Ultrapar Participacoes
Given the investment horizon of 90 days Par Pacific Holdings is expected to generate 1.26 times more return on investment than Ultrapar Participacoes. However, Par Pacific is 1.26 times more volatile than Ultrapar Participacoes SA. It trades about 0.08 of its potential returns per unit of risk. Ultrapar Participacoes SA is currently generating about -0.19 per unit of risk. If you would invest 1,652 in Par Pacific Holdings on August 24, 2024 and sell it today you would earn a total of 85.00 from holding Par Pacific Holdings or generate 5.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Par Pacific Holdings vs. Ultrapar Participacoes SA
Performance |
| Timeline |
| Par Pacific Holdings |
| Ultrapar Participacoes |
Par Pacific and Ultrapar Participacoes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Par Pacific and Ultrapar Participacoes
The main advantage of trading using opposite Par Pacific and Ultrapar Participacoes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Par Pacific 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.| Par Pacific vs. Delek Logistics Partners | Par Pacific vs. CVR Energy | Par Pacific vs. PBF Energy | Par Pacific vs. HF Sinclair Corp |
| Ultrapar Participacoes vs. Star Gas Partners | Ultrapar Participacoes vs. Par Pacific Holdings | Ultrapar Participacoes vs. Delek Energy | Ultrapar Participacoes vs. Crossamerica Partners LP |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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