Correlation Between Savencia and Ecopetrol
Can any of the company-specific risk be diversified away by investing in both Savencia 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 Savencia and Ecopetrol into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Savencia SA and Ecopetrol SA ADR, you can compare the effects of market volatilities on Savencia 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 Savencia with a short position of Ecopetrol. Check out your portfolio center. Please also check ongoing floating volatility patterns of Savencia and Ecopetrol.
Diversification Opportunities for Savencia and Ecopetrol
Pay attention - limited upside
The 3 months correlation between Savencia and Ecopetrol is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Savencia SA 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 Savencia 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 Savencia SA 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 Savencia i.e., Savencia and Ecopetrol go up and down completely randomly.
Pair Corralation between Savencia and Ecopetrol
If you would invest 1,030 in Ecopetrol SA ADR on January 26, 2024 and sell it today you would earn a total of 139.00 from holding Ecopetrol SA ADR or generate 13.5% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Flat |
Strength | Insignificant |
Accuracy | 4.76% |
Values | Daily Returns |
Savencia SA vs. Ecopetrol SA ADR
Performance |
Timeline |
Savencia SA |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Ecopetrol SA ADR |
Savencia and Ecopetrol Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Savencia and Ecopetrol
The main advantage of trading using opposite Savencia and Ecopetrol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Savencia 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 Savencia SA 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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