Correlation Between Ligand Pharmaceuticals and Ecopetrol
Can any of the company-specific risk be diversified away by investing in both Ligand Pharmaceuticals 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 Ligand Pharmaceuticals and Ecopetrol into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ligand Pharmaceuticals Tr and Ecopetrol SA ADR, you can compare the effects of market volatilities on Ligand Pharmaceuticals 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 Ligand Pharmaceuticals with a short position of Ecopetrol. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ligand Pharmaceuticals and Ecopetrol.
Diversification Opportunities for Ligand Pharmaceuticals and Ecopetrol
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ligand and Ecopetrol is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Ligand Pharmaceuticals Tr 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 Ligand Pharmaceuticals 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 Ligand Pharmaceuticals Tr 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 Ligand Pharmaceuticals i.e., Ligand Pharmaceuticals and Ecopetrol go up and down completely randomly.
Pair Corralation between Ligand Pharmaceuticals and Ecopetrol
Assuming the 90 days horizon Ligand Pharmaceuticals is expected to generate 4.74 times less return on investment than Ecopetrol. In addition to that, Ligand Pharmaceuticals is 2.5 times more volatile than Ecopetrol SA ADR. It trades about 0.02 of its total potential returns per unit of risk. Ecopetrol SA ADR is currently generating about 0.25 per unit of volatility. If you would invest 1,019 in Ecopetrol SA ADR on January 19, 2024 and sell it today you would earn a total of 115.00 from holding Ecopetrol SA ADR or generate 11.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 27.27% |
| Values | Daily Returns |
Ligand Pharmaceuticals Tr vs. Ecopetrol SA ADR
Performance |
| Timeline |
| Ligand Pharmaceuticals |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Ecopetrol SA ADR |
Ligand Pharmaceuticals and Ecopetrol Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ligand Pharmaceuticals and Ecopetrol
The main advantage of trading using opposite Ligand Pharmaceuticals and Ecopetrol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ligand Pharmaceuticals 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.| Ligand Pharmaceuticals vs. Group Ten Metals | Ligand Pharmaceuticals vs. Ascendant Resources | Ligand Pharmaceuticals vs. Atico Mining | Ligand Pharmaceuticals vs. Prime Mining Corp |
| 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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