Correlation Between National Beverage and Ecopetrol
Can any of the company-specific risk be diversified away by investing in both National Beverage 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 National Beverage and Ecopetrol into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Beverage Corp and Ecopetrol SA, you can compare the effects of market volatilities on National Beverage 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 National Beverage with a short position of Ecopetrol. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Beverage and Ecopetrol.
Diversification Opportunities for National Beverage and Ecopetrol
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between National and Ecopetrol is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Ecopetrol SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecopetrol SA and National Beverage 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 National Beverage Corp 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 National Beverage i.e., National Beverage and Ecopetrol go up and down completely randomly.
Pair Corralation between National Beverage and Ecopetrol
Assuming the 90 days horizon National Beverage is expected to generate 1.01 times less return on investment than Ecopetrol. But when comparing it to its historical volatility, National Beverage Corp is 1.27 times less risky than Ecopetrol. It trades about 0.18 of its potential returns per unit of risk. Ecopetrol SA is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 730.00 in Ecopetrol SA on August 25, 2024 and sell it today you would earn a total of 48.00 from holding Ecopetrol SA or generate 6.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Beverage Corp vs. Ecopetrol SA
Performance |
| Timeline |
| National Beverage Corp |
| Ecopetrol SA |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
National Beverage and Ecopetrol Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Beverage and Ecopetrol
The main advantage of trading using opposite National Beverage and Ecopetrol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Beverage 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.| National Beverage vs. Coca Cola FEMSA SAB | National Beverage vs. COCA A HBC | National Beverage vs. Superior Plus Corp | National Beverage vs. NMI Holdings |
| Ecopetrol vs. China Resources Beer | Ecopetrol vs. ANTA SPORTS PRODUCT | Ecopetrol vs. Molson Coors Beverage | Ecopetrol vs. United Breweries Co |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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