Correlation Between Ecopetrol and AXP Energy
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and AXP Energy 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 AXP Energy 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 AXP Energy, you can compare the effects of market volatilities on Ecopetrol and AXP Energy 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 AXP Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and AXP Energy.
Diversification Opportunities for Ecopetrol and AXP Energy
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ecopetrol and AXP is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and AXP Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXP Energy 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 AXP Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXP Energy has no effect on the direction of Ecopetrol i.e., Ecopetrol and AXP Energy go up and down completely randomly.
Pair Corralation between Ecopetrol and AXP Energy
Allowing for the 90-day total investment horizon Ecopetrol SA ADR is expected to under-perform the AXP Energy. But the stock apears to be less risky and, when comparing its historical volatility, Ecopetrol SA ADR is 7.34 times less risky than AXP Energy. The stock trades about -0.15 of its potential returns per unit of risk. The AXP Energy is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 0.05 in AXP Energy on August 24, 2024 and sell it today you would earn a total of 0.05 from holding AXP Energy or generate 100.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ecopetrol SA ADR vs. AXP Energy
Performance |
| Timeline |
| Ecopetrol SA ADR |
| AXP Energy |
Ecopetrol and AXP Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and AXP Energy
The main advantage of trading using opposite Ecopetrol and AXP Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, AXP Energy 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 AXP Energy will offset losses from the drop in AXP Energy's long position.| Ecopetrol vs. Petroleo Brasileiro Petrobras | Ecopetrol vs. Equinor ASA ADR | Ecopetrol vs. Eni SpA ADR | Ecopetrol vs. Cenovus Energy |
| AXP Energy vs. BEST Inc | AXP Energy vs. ArcBest Corp | AXP Energy vs. Aquagold International | AXP Energy vs. Morningstar Unconstrained Allocation |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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