Correlation Between Ecopetrol and Adams Resources
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and Adams Resources 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 Ecopetrol and Adams Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecopetrol SA ADR and Adams Resources Energy, you can compare the effects of market volatilities on Ecopetrol and Adams Resources 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 Ecopetrol with a short position of Adams Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and Adams Resources.
Diversification Opportunities for Ecopetrol and Adams Resources
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ecopetrol and Adams is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and Adams Resources Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adams Resources Energy and Ecopetrol 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 Ecopetrol SA ADR are associated (or correlated) with Adams Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adams Resources Energy has no effect on the direction of Ecopetrol i.e., Ecopetrol and Adams Resources go up and down completely randomly.
Pair Corralation between Ecopetrol and Adams Resources
Allowing for the 90-day total investment horizon Ecopetrol is expected to generate 1.43 times less return on investment than Adams Resources. But when comparing it to its historical volatility, Ecopetrol SA ADR is 1.25 times less risky than Adams Resources. It trades about 0.29 of its potential returns per unit of risk. Adams Resources Energy is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 2,401 in Adams Resources Energy on January 18, 2024 and sell it today you would earn a total of 459.00 from holding Adams Resources Energy or generate 19.12% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Ecopetrol SA ADR vs. Adams Resources Energy
Performance |
Timeline |
Ecopetrol SA ADR |
Adams Resources Energy |
Ecopetrol and Adams Resources Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ecopetrol and Adams Resources
The main advantage of trading using opposite Ecopetrol and Adams Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, Adams Resources 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 Adams Resources will offset losses from the drop in Adams Resources' long position.The idea behind Ecopetrol SA ADR and Adams Resources Energy 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
Other Complementary Tools
AI Investment Finder Use AI to screen and filter profitable investment opportunities | |
Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
Commodity Directory Find actively traded commodities issued by global exchanges | |
Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine |