Correlation Between Ecopetrol and HP
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and HP 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 HP 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 HP Inc, you can compare the effects of market volatilities on Ecopetrol and HP 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 HP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and HP.
Diversification Opportunities for Ecopetrol and HP
Very good diversification
The 3 months correlation between Ecopetrol and HP is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and HP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HP Inc 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 HP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HP Inc has no effect on the direction of Ecopetrol i.e., Ecopetrol and HP go up and down completely randomly.
Pair Corralation between Ecopetrol and HP
Allowing for the 90-day total investment horizon Ecopetrol SA ADR is expected to generate 1.4 times more return on investment than HP. However, Ecopetrol is 1.4 times more volatile than HP Inc. It trades about 0.31 of its potential returns per unit of risk. HP Inc is currently generating about -0.21 per unit of risk. If you would invest 1,030 in Ecopetrol SA ADR on January 26, 2024 and sell it today you would earn a total of 139.00 from holding Ecopetrol SA ADR or generate 13.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ecopetrol SA ADR vs. HP Inc
Performance |
| Timeline |
| Ecopetrol SA ADR |
| HP Inc |
Ecopetrol and HP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and HP
The main advantage of trading using opposite Ecopetrol and HP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, HP 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 HP will offset losses from the drop in HP's long position.| 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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