Correlation Between ATCO and Ecopetrol
Can any of the company-specific risk be diversified away by investing in both ATCO and Ecopetrol 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 ATCO and Ecopetrol into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ATCO and Ecopetrol SA ADR, you can compare the effects of market volatilities on ATCO and Ecopetrol 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 ATCO with a short position of Ecopetrol. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATCO and Ecopetrol.
Diversification Opportunities for ATCO and Ecopetrol
Weak diversification
The 3 months correlation between ATCO and Ecopetrol is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding ATCO and Ecopetrol SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecopetrol SA ADR and ATCO 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 ATCO are associated (or correlated) with Ecopetrol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecopetrol SA ADR has no effect on the direction of ATCO i.e., ATCO and Ecopetrol go up and down completely randomly.
Pair Corralation between ATCO and Ecopetrol
If you would invest 1,035 in Ecopetrol SA ADR on January 25, 2024 and sell it today you would earn a total of 133.00 from holding Ecopetrol SA ADR or generate 12.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ATCO vs. Ecopetrol SA ADR
Performance |
| Timeline |
| ATCO |
| Ecopetrol SA ADR |
ATCO and Ecopetrol Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ATCO and Ecopetrol
The main advantage of trading using opposite ATCO and Ecopetrol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATCO position performs unexpectedly, Ecopetrol 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 Ecopetrol will offset losses from the drop in Ecopetrol's long position.The idea behind ATCO and Ecopetrol SA 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.| Ecopetrol vs. Petroleo Brasileiro Petrobras | Ecopetrol vs. Equinor ASA ADR | Ecopetrol vs. Eni SpA ADR | Ecopetrol vs. Cenovus Energy |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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