Correlation Between Ecopetrol and GBX International

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

Diversification Opportunities for Ecopetrol and GBX International

-0.44

Correlation Coefficient

Ecopetrol  GBX International

Very good diversification

The 3 months correlation between Ecopetrol and GBX is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and GBX International Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GBX International 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 GBX International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GBX International has no effect on the direction of Ecopetrol i.e., Ecopetrol and GBX International go up and down completely randomly.

Pair Corralation between Ecopetrol and GBX International

Allowing for the 90-day total investment horizon Ecopetrol SA ADR is expected to under-perform the GBX International. But the stock apears to be less risky and, when comparing its historical volatility, Ecopetrol SA ADR is 50.84 times less risky than GBX International. The stock trades about -0.06 of its potential returns per unit of risk. The GBX International Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  0.01  in GBX International Group on September 23, 2024 and sell it today you would earn a total of  0.01  from holding GBX International Group or generate 100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.63%
Values	Daily Returns

Ecopetrol SA ADR  vs.  GBX International Group

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 conflicting 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.

GBX International

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Ecopetrol and GBX International

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

The idea behind Ecopetrol SA ADR and GBX International Group 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.