Correlation Between Terawulf and Ecopetrol

Can any of the company-specific risk be diversified away by investing in both Terawulf 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 Terawulf and Ecopetrol into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Terawulf and Ecopetrol SA ADR, you can compare the effects of market volatilities on Terawulf 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 Terawulf with a short position of Ecopetrol. Check out your portfolio center. Please also check ongoing floating volatility patterns of Terawulf and Ecopetrol.

Diversification Opportunities for Terawulf and Ecopetrol

0.08

Correlation Coefficient

Terawulf  Ecopetrol

Significant diversification

The 3 months correlation between Terawulf and Ecopetrol is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Terawulf 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 Terawulf 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 Terawulf 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 Terawulf i.e., Terawulf and Ecopetrol go up and down completely randomly.

Pair Corralation between Terawulf and Ecopetrol

Given the investment horizon of 90 days Terawulf is expected to generate 4.44 times more return on investment than Ecopetrol. However, Terawulf is 4.44 times more volatile than Ecopetrol SA ADR. It trades about 0.12 of its potential returns per unit of risk. Ecopetrol SA ADR is currently generating about 0.18 per unit of risk. If you would invest  184.00  in Terawulf on March 7, 2024 and sell it today you would earn a total of  95.00  from holding Terawulf or generate 51.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Terawulf  vs.  Ecopetrol SA ADR

Terawulf

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Terawulf are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Terawulf reported solid returns over the last few months and may actually be approaching a breakup point.

Ecopetrol SA ADR

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ecopetrol SA ADR are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Ecopetrol exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Terawulf and Ecopetrol

The main advantage of trading using opposite Terawulf and Ecopetrol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Terawulf 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 Terawulf 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.