Correlation Between Ecopetrol and Innovative Payment

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

Diversification Opportunities for Ecopetrol and Innovative Payment

-0.53

Correlation Coefficient

Ecopetrol  Innovative Payment

Excellent diversification

The 3 months correlation between Ecopetrol and Innovative is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and Innovative Payment Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovative Payment 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 Innovative Payment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovative Payment has no effect on the direction of Ecopetrol i.e., Ecopetrol and Innovative Payment go up and down completely randomly.

Pair Corralation between Ecopetrol and Innovative Payment

Allowing for the 90-day total investment horizon Ecopetrol SA ADR is expected to under-perform the Innovative Payment. But the stock apears to be less risky and, when comparing its historical volatility, Ecopetrol SA ADR is 6.13 times less risky than Innovative Payment. The stock trades about -0.09 of its potential returns per unit of risk. The Innovative Payment Solutions is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  10.00  in Innovative Payment Solutions on September 17, 2024 and sell it today you would lose (3.00) from holding Innovative Payment Solutions or give up 30.0% of portfolio value over 90 days.

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

Ecopetrol SA ADR  vs.  Innovative Payment Solutions

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.

Innovative Payment

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Innovative Payment Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Innovative Payment is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Ecopetrol and Innovative Payment

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

The idea behind Ecopetrol SA ADR and Innovative Payment Solutions 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.