Correlation Between TSINGTAO H and Ecopetrol

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Can any of the company-specific risk be diversified away by investing in both TSINGTAO H 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 TSINGTAO H and Ecopetrol into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TSINGTAO H and Ecopetrol SA, you can compare the effects of market volatilities on TSINGTAO H 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 TSINGTAO H with a short position of Ecopetrol. Check out your portfolio center. Please also check ongoing floating volatility patterns of TSINGTAO H and Ecopetrol.

Diversification Opportunities for TSINGTAO H and Ecopetrol

-0.56
  Correlation Coefficient

Excellent diversification

The 3 months correlation between TSINGTAO and Ecopetrol is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding TSINGTAO -H- - and Ecopetrol SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecopetrol SA and TSINGTAO H 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 TSINGTAO H 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 has no effect on the direction of TSINGTAO H i.e., TSINGTAO H and Ecopetrol go up and down completely randomly.

Pair Corralation between TSINGTAO H and Ecopetrol

Assuming the 90 days trading horizon TSINGTAO H is expected to generate 0.63 times more return on investment than Ecopetrol. However, TSINGTAO H is 1.59 times less risky than Ecopetrol. It trades about 0.11 of its potential returns per unit of risk. Ecopetrol SA is currently generating about -0.08 per unit of risk. If you would invest  592.00  in TSINGTAO H on December 30, 2023 and sell it today you would earn a total of  34.00  from holding TSINGTAO H or generate 5.74% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

TSINGTAO -H- -  vs.  Ecopetrol SA

 Performance 
       Timeline  
TSINGTAO -H- - 

Risk-Adjusted Performance

3 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in TSINGTAO H are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, TSINGTAO H may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Ecopetrol SA 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Ecopetrol SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

TSINGTAO H and Ecopetrol Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with TSINGTAO H and Ecopetrol

The main advantage of trading using opposite TSINGTAO H and Ecopetrol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TSINGTAO H 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 TSINGTAO H and Ecopetrol SA 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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