Correlation Between Ecopetrol and DSV Panalpina

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

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

Diversification Opportunities for Ecopetrol and DSV Panalpina

-0.52

Correlation Coefficient

Ecopetrol  DSV Panalpina

Excellent diversification

The 3 months correlation between Ecopetrol and DSV is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and DSV Panalpina AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DSV Panalpina AS and Ecopetrol 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 Ecopetrol SA ADR are associated (or correlated) with DSV Panalpina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DSV Panalpina AS has no effect on the direction of Ecopetrol i.e., Ecopetrol and DSV Panalpina go up and down completely randomly.

Pair Corralation between Ecopetrol and DSV Panalpina

Allowing for the 90-day total investment horizon Ecopetrol SA ADR is expected to under-perform the DSV Panalpina. But the stock apears to be less risky and, when comparing its historical volatility, Ecopetrol SA ADR is 1.61 times less risky than DSV Panalpina. The stock trades about -0.12 of its potential returns per unit of risk. The DSV Panalpina AS is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  17,940  in DSV Panalpina AS on September 4, 2024 and sell it today you would earn a total of  4,000  from holding DSV Panalpina AS or generate 22.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Ecopetrol SA ADR  vs.  DSV Panalpina AS

Ecopetrol SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ecopetrol SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

DSV Panalpina AS

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DSV Panalpina AS are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DSV Panalpina reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ecopetrol and DSV Panalpina

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

The idea behind Ecopetrol SA ADR and DSV Panalpina AS 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.