Correlation Between Ecopetrol and Grindrod

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

Diversification Opportunities for Ecopetrol and Grindrod

-0.55

Correlation Coefficient

Ecopetrol  Grindrod

Excellent diversification

The 3 months correlation between Ecopetrol and Grindrod is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and Grindrod Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grindrod ADR 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 Grindrod. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grindrod ADR has no effect on the direction of Ecopetrol i.e., Ecopetrol and Grindrod go up and down completely randomly.

Pair Corralation between Ecopetrol and Grindrod

If you would invest  746.00  in Ecopetrol SA ADR on September 13, 2024 and sell it today you would earn a total of  90.00  from holding Ecopetrol SA ADR or generate 12.06% return on investment over 90 days.

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

Ecopetrol SA ADR  vs.  Grindrod Ltd ADR

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 latest inconsistent performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Grindrod ADR

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Grindrod Ltd ADR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Grindrod is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ecopetrol and Grindrod

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

The idea behind Ecopetrol SA ADR and Grindrod Ltd ADR 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.