Correlation Between ASOS PLC and Ecopetrol
Can any of the company-specific risk be diversified away by investing in both ASOS PLC 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 ASOS PLC and Ecopetrol into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ASOS PLC and Ecopetrol SA, you can compare the effects of market volatilities on ASOS PLC 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 ASOS PLC with a short position of Ecopetrol. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASOS PLC and Ecopetrol.
Diversification Opportunities for ASOS PLC and Ecopetrol
Good diversification
The 3 months correlation between ASOS and Ecopetrol is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding ASOS PLC and Ecopetrol SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecopetrol SA and ASOS PLC 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 ASOS PLC 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 has no effect on the direction of ASOS PLC i.e., ASOS PLC and Ecopetrol go up and down completely randomly.
Pair Corralation between ASOS PLC and Ecopetrol
Assuming the 90 days trading horizon ASOS PLC is expected to under-perform the Ecopetrol. In addition to that, ASOS PLC is 1.43 times more volatile than Ecopetrol SA. It trades about -0.04 of its total potential returns per unit of risk. Ecopetrol SA is currently generating about 0.01 per unit of volatility. If you would invest 1,153 in Ecopetrol SA on January 25, 2024 and sell it today you would lose (63.00) from holding Ecopetrol SA or give up 5.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ASOS PLC vs. Ecopetrol SA
Performance |
| Timeline |
| ASOS PLC |
| Ecopetrol SA |
ASOS PLC and Ecopetrol Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ASOS PLC and Ecopetrol
The main advantage of trading using opposite ASOS PLC and Ecopetrol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASOS PLC 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.| ASOS PLC vs. National Storage Affiliates | ASOS PLC vs. Pure Storage | ASOS PLC vs. MICRONIC MYDATA | ASOS PLC vs. Datang International Power |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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