Correlation Between Aisin and Ecopetrol
Can any of the company-specific risk be diversified away by investing in both Aisin 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 Aisin and Ecopetrol into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aisin and Ecopetrol SA ADR, you can compare the effects of market volatilities on Aisin 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 Aisin with a short position of Ecopetrol. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aisin and Ecopetrol.
Diversification Opportunities for Aisin and Ecopetrol
Average diversification
The 3 months correlation between Aisin and Ecopetrol is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Aisin 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 Aisin 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 Aisin 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 Aisin i.e., Aisin and Ecopetrol go up and down completely randomly.
Pair Corralation between Aisin and Ecopetrol
If you would invest 1,034 in Ecopetrol SA ADR on January 20, 2024 and sell it today you would earn a total of 100.00 from holding Ecopetrol SA ADR or generate 9.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 4.55% |
| Values | Daily Returns |
Aisin vs. Ecopetrol SA ADR
Performance |
| Timeline |
| Aisin |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Ecopetrol SA ADR |
Aisin and Ecopetrol Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aisin and Ecopetrol
The main advantage of trading using opposite Aisin and Ecopetrol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aisin 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 Aisin 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.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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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