Correlation Between Ecopetrol and New York

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

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

Diversification Opportunities for Ecopetrol and New York

-0.4

Correlation Coefficient

Ecopetrol  New York

Very good diversification

The 3 months correlation between Ecopetrol and New is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA and The New York in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New York 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 New York. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New York has no effect on the direction of Ecopetrol i.e., Ecopetrol and New York go up and down completely randomly.

Pair Corralation between Ecopetrol and New York

Assuming the 90 days trading horizon Ecopetrol is expected to generate 2.15 times less return on investment than New York. In addition to that, Ecopetrol is 1.08 times more volatile than The New York. It trades about 0.01 of its total potential returns per unit of risk. The New York is currently generating about 0.02 per unit of volatility. If you would invest  5,042  in The New York on September 23, 2024 and sell it today you would earn a total of  62.00  from holding The New York or generate 1.23% 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.  The New York

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

New York

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The New York are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, New York is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ecopetrol and New York

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

The idea behind Ecopetrol SA and The New York 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .