Correlation Between Ecopetrol and Suncor Energy
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and Suncor Energy 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 Suncor Energy 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 Suncor Energy, you can compare the effects of market volatilities on Ecopetrol and Suncor Energy 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 Suncor Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and Suncor Energy.
Diversification Opportunities for Ecopetrol and Suncor Energy
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ecopetrol and Suncor is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and Suncor Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suncor 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 Suncor Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suncor Energy has no effect on the direction of Ecopetrol i.e., Ecopetrol and Suncor Energy go up and down completely randomly.
Pair Corralation between Ecopetrol and Suncor Energy
Allowing for the 90-day total investment horizon Ecopetrol is expected to generate 8.49 times less return on investment than Suncor Energy. In addition to that, Ecopetrol is 1.3 times more volatile than Suncor Energy. It trades about 0.02 of its total potential returns per unit of risk. Suncor Energy is currently generating about 0.24 per unit of volatility. If you would invest 3,236 in Suncor Energy on January 26, 2024 and sell it today you would earn a total of 691.00 from holding Suncor Energy or generate 21.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.41% |
| Values | Daily Returns |
Ecopetrol SA ADR vs. Suncor Energy
Performance |
| Timeline |
| Ecopetrol SA ADR |
| Suncor Energy |
Ecopetrol and Suncor Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and Suncor Energy
The main advantage of trading using opposite Ecopetrol and Suncor Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, Suncor Energy 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 Suncor Energy will offset losses from the drop in Suncor Energy's long position.| Ecopetrol vs. Petroleo Brasileiro Petrobras | Ecopetrol vs. Equinor ASA ADR | Ecopetrol vs. Eni SpA ADR | Ecopetrol vs. Cenovus Energy |
| Suncor Energy vs. Imperial Oil | Suncor Energy vs. Ecopetrol SA ADR | Suncor Energy vs. Petroleo Brasileiro Petrobras | Suncor Energy vs. Equinor ASA ADR |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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