Correlation Between MidCap Financial and Ecopetrol
Can any of the company-specific risk be diversified away by investing in both MidCap Financial 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 MidCap Financial and Ecopetrol into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MidCap Financial Investment and Ecopetrol SA, you can compare the effects of market volatilities on MidCap Financial 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 MidCap Financial with a short position of Ecopetrol. Check out your portfolio center. Please also check ongoing floating volatility patterns of MidCap Financial and Ecopetrol.
Diversification Opportunities for MidCap Financial and Ecopetrol
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between MidCap and Ecopetrol is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding MidCap Financial Investment and Ecopetrol SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecopetrol SA and MidCap Financial 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 MidCap Financial Investment 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 MidCap Financial i.e., MidCap Financial and Ecopetrol go up and down completely randomly.
Pair Corralation between MidCap Financial and Ecopetrol
Assuming the 90 days trading horizon MidCap Financial is expected to generate 4.95 times less return on investment than Ecopetrol. But when comparing it to its historical volatility, MidCap Financial Investment is 1.67 times less risky than Ecopetrol. It trades about 0.13 of its potential returns per unit of risk. Ecopetrol SA is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 728.00 in Ecopetrol SA on October 23, 2024 and sell it today you would earn a total of 84.00 from holding Ecopetrol SA or generate 11.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 94.12% |
| Values | Daily Returns |
MidCap Financial Investment vs. Ecopetrol SA
Performance |
| Timeline |
| MidCap Financial Inv |
| Ecopetrol SA |
MidCap Financial and Ecopetrol Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MidCap Financial and Ecopetrol
The main advantage of trading using opposite MidCap Financial and Ecopetrol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MidCap Financial 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.| MidCap Financial vs. Apple Inc | MidCap Financial vs. Apple Inc | MidCap Financial vs. Apple Inc | MidCap Financial vs. Apple Inc |
| Ecopetrol vs. ARDAGH METAL PACDL 0001 | Ecopetrol vs. Stag Industrial | Ecopetrol vs. SLR Investment Corp | Ecopetrol vs. MidCap Financial Investment |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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