Correlation Between Ecopetrol and Everspin Technologies

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

By analyzing existing cross correlation between Ecopetrol SA and Everspin Technologies, you can compare the effects of market volatilities on Ecopetrol and Everspin Technologies 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 Everspin Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and Everspin Technologies.

Diversification Opportunities for Ecopetrol and Everspin Technologies

-0.55

Correlation Coefficient

Ecopetrol  Everspin Technologies

Excellent diversification

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

Pair Corralation between Ecopetrol and Everspin Technologies

Assuming the 90 days trading horizon Ecopetrol SA is expected to under-perform the Everspin Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Ecopetrol SA is 1.3 times less risky than Everspin Technologies. The stock trades about -0.01 of its potential returns per unit of risk. The Everspin Technologies is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  480.00  in Everspin Technologies on September 12, 2024 and sell it today you would earn a total of  115.00  from holding Everspin Technologies or generate 23.96% 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  vs.  Everspin Technologies

Ecopetrol SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ecopetrol SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Ecopetrol is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Everspin Technologies

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Everspin Technologies are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Everspin Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ecopetrol and Everspin Technologies

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

The idea behind Ecopetrol SA and Everspin Technologies 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.

Check out your portfolio center.

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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.