Correlation Between Ecopetrol and Real Luck

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

Diversification Opportunities for Ecopetrol and Real Luck

0.59

Correlation Coefficient

Ecopetrol  Real Luck

Very weak diversification

The 3 months correlation between Ecopetrol and Real is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and Real Luck Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Luck Group 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 Real Luck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Luck Group has no effect on the direction of Ecopetrol i.e., Ecopetrol and Real Luck go up and down completely randomly.

Pair Corralation between Ecopetrol and Real Luck

Allowing for the 90-day total investment horizon Ecopetrol SA ADR is expected to under-perform the Real Luck. But the stock apears to be less risky and, when comparing its historical volatility, Ecopetrol SA ADR is 13.77 times less risky than Real Luck. The stock trades about -0.04 of its potential returns per unit of risk. The Real Luck Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  0.28  in Real Luck Group on September 12, 2024 and sell it today you would lose (0.28) from holding Real Luck Group or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.19%
Values	Daily Returns

Ecopetrol SA ADR  vs.  Real Luck 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 latest weak 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.

Real Luck Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Real Luck Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Ecopetrol and Real Luck

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

The idea behind Ecopetrol SA ADR and Real Luck 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.