Correlation Between Apple and Ecopetrol

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

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

Diversification Opportunities for Apple and Ecopetrol

-0.29

Correlation Coefficient

Apple  Ecopetrol

Very good diversification

The 3 months correlation between Apple and Ecopetrol is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Ecopetrol SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecopetrol SA and Apple 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 Apple Inc are associated (or correlated) with Ecopetrol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecopetrol SA has no effect on the direction of Apple i.e., Apple and Ecopetrol go up and down completely randomly.

Pair Corralation between Apple and Ecopetrol

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.62 times more return on investment than Ecopetrol. However, Apple Inc is 1.6 times less risky than Ecopetrol. It trades about 0.23 of its potential returns per unit of risk. Ecopetrol SA is currently generating about -0.03 per unit of risk. If you would invest  19,353  in Apple Inc on September 16, 2024 and sell it today you would earn a total of  4,262  from holding Apple Inc or generate 22.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Apple Inc  vs.  Ecopetrol SA

Apple Inc

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Apple exhibited solid returns over the last few months and may actually be approaching a breakup point.

Ecopetrol SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ecopetrol SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Ecopetrol is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Apple and Ecopetrol

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

The idea behind Apple Inc and Ecopetrol 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..