Correlation Between Ecopetrol and Bluebird Bio
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and Bluebird Bio 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 Bluebird Bio 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 Bluebird bio, you can compare the effects of market volatilities on Ecopetrol and Bluebird Bio 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 Bluebird Bio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and Bluebird Bio.
Diversification Opportunities for Ecopetrol and Bluebird Bio
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ecopetrol and Bluebird is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and Bluebird bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bluebird bio 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 Bluebird Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bluebird bio has no effect on the direction of Ecopetrol i.e., Ecopetrol and Bluebird Bio go up and down completely randomly.
Pair Corralation between Ecopetrol and Bluebird Bio
Allowing for the 90-day total investment horizon Ecopetrol SA ADR is expected to generate 0.31 times more return on investment than Bluebird Bio. However, Ecopetrol SA ADR is 3.22 times less risky than Bluebird Bio. It trades about 0.09 of its potential returns per unit of risk. Bluebird bio is currently generating about -0.2 per unit of risk. If you would invest 805.00 in Ecopetrol SA ADR on August 27, 2024 and sell it today you would earn a total of 28.00 from holding Ecopetrol SA ADR or generate 3.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ecopetrol SA ADR vs. Bluebird bio
Performance |
| Timeline |
| Ecopetrol SA ADR |
| Bluebird bio |
Ecopetrol and Bluebird Bio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and Bluebird Bio
The main advantage of trading using opposite Ecopetrol and Bluebird Bio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, Bluebird Bio 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 Bluebird Bio will offset losses from the drop in Bluebird Bio's long position.The idea behind Ecopetrol SA ADR and Bluebird bio 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.| Bluebird Bio vs. Eliem Therapeutics | Bluebird Bio vs. HCW Biologics | Bluebird Bio vs. Scpharmaceuticals | Bluebird Bio vs. Milestone Pharmaceuticals |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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