Correlation Between Ecopetrol and Macquarie Group

Can any of the company-specific risk be diversified away by investing in both Ecopetrol and Macquarie Group 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 Macquarie Group 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 Macquarie Group Ltd, you can compare the effects of market volatilities on Ecopetrol and Macquarie Group 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 Macquarie Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and Macquarie Group.

Diversification Opportunities for Ecopetrol and Macquarie Group

-0.52

Correlation Coefficient

Ecopetrol  Macquarie Group

Excellent diversification

The 3 months correlation between Ecopetrol and Macquarie is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and Macquarie Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macquarie Group 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 Macquarie Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macquarie Group has no effect on the direction of Ecopetrol i.e., Ecopetrol and Macquarie Group go up and down completely randomly.

Pair Corralation between Ecopetrol and Macquarie Group

Allowing for the 90-day total investment horizon Ecopetrol SA ADR is expected to generate 0.92 times more return on investment than Macquarie Group. However, Ecopetrol SA ADR is 1.09 times less risky than Macquarie Group. It trades about -0.14 of its potential returns per unit of risk. Macquarie Group Ltd is currently generating about -0.15 per unit of risk. If you would invest  1,213  in Ecopetrol SA ADR on February 4, 2024 and sell it today you would lose (59.00) from holding Ecopetrol SA ADR or give up 4.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Ecopetrol SA ADR  vs.  Macquarie Group Ltd

Ecopetrol SA ADR

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ecopetrol SA ADR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Ecopetrol is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Macquarie Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Macquarie Group Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, Macquarie Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ecopetrol and Macquarie Group

The main advantage of trading using opposite Ecopetrol and Macquarie Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, Macquarie Group 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 Macquarie Group will offset losses from the drop in Macquarie Group's long position.

The idea behind Ecopetrol SA ADR and Macquarie Group Ltd 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.