Correlation Between BTB Real and Ecopetrol
Can any of the company-specific risk be diversified away by investing in both BTB Real 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 BTB Real and Ecopetrol into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BTB Real Estate and Ecopetrol SA ADR, you can compare the effects of market volatilities on BTB Real 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 BTB Real with a short position of Ecopetrol. Check out your portfolio center. Please also check ongoing floating volatility patterns of BTB Real and Ecopetrol.
Diversification Opportunities for BTB Real and Ecopetrol
Very weak diversification
The 3 months correlation between BTB and Ecopetrol is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding BTB Real Estate 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 BTB Real 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 BTB Real Estate 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 BTB Real i.e., BTB Real and Ecopetrol go up and down completely randomly.
Pair Corralation between BTB Real and Ecopetrol
Assuming the 90 days horizon BTB Real is expected to generate 5.97 times less return on investment than Ecopetrol. But when comparing it to its historical volatility, BTB Real Estate is 2.03 times less risky than Ecopetrol. It trades about 0.08 of its potential returns per unit of risk. Ecopetrol SA ADR is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 1,019 in Ecopetrol SA ADR on January 19, 2024 and sell it today you would earn a total of 115.00 from holding Ecopetrol SA ADR or generate 11.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BTB Real Estate vs. Ecopetrol SA ADR
Performance |
| Timeline |
| BTB Real Estate |
| Ecopetrol SA ADR |
BTB Real and Ecopetrol Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BTB Real and Ecopetrol
The main advantage of trading using opposite BTB Real and Ecopetrol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BTB Real 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.| BTB Real vs. Ashford Hospitality Trust | BTB Real vs. Ashford Hospitality Trust | BTB Real vs. Braemar Hotels Resorts | BTB Real vs. Braemar Hotels Resorts |
| 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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