Correlation Between Johnson Johnson and Ecopetrol

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

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

Diversification Opportunities for Johnson Johnson and Ecopetrol

-0.61

Correlation Coefficient

Johnson Johnson  Ecopetrol

Excellent diversification

The 3 months correlation between Johnson and Ecopetrol is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Ecopetrol SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecopetrol SA and Johnson Johnson 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 Johnson Johnson 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 Johnson Johnson i.e., Johnson Johnson and Ecopetrol go up and down completely randomly.

Pair Corralation between Johnson Johnson and Ecopetrol

If you would invest  1,036  in Ecopetrol SA on January 28, 2024 and sell it today you would earn a total of  54.00  from holding Ecopetrol SA or generate 5.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	0.0%
Values	Daily Returns

Johnson Johnson  vs.  Ecopetrol SA

Johnson Johnson

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Johnson Johnson has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Johnson Johnson is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Ecopetrol SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ecopetrol SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical indicators, Ecopetrol is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Johnson Johnson and Ecopetrol

The main advantage of trading using opposite Johnson Johnson and Ecopetrol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson 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 Johnson Johnson 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..