Correlation Between Ecopetrol and Cascades
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and Cascades 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 Cascades 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 Cascades, you can compare the effects of market volatilities on Ecopetrol and Cascades 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 Cascades. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and Cascades.
Diversification Opportunities for Ecopetrol and Cascades
Excellent diversification
The 3 months correlation between Ecopetrol and Cascades is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and Cascades in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cascades 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 Cascades. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cascades has no effect on the direction of Ecopetrol i.e., Ecopetrol and Cascades go up and down completely randomly.
Pair Corralation between Ecopetrol and Cascades
Allowing for the 90-day total investment horizon Ecopetrol SA ADR is expected to under-perform the Cascades. But the stock apears to be less risky and, when comparing its historical volatility, Ecopetrol SA ADR is 1.52 times less risky than Cascades. The stock trades about -0.05 of its potential returns per unit of risk. The Cascades is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 860.00 in Cascades on September 3, 2024 and sell it today you would lose (17.00) from holding Cascades or give up 1.98% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 78.54% |
| Values | Daily Returns |
Ecopetrol SA ADR vs. Cascades
Performance |
| Timeline |
| Ecopetrol SA ADR |
| Cascades |
Ecopetrol and Cascades Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and Cascades
The main advantage of trading using opposite Ecopetrol and Cascades positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, Cascades 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 Cascades will offset losses from the drop in Cascades' long position.| Ecopetrol vs. Petroleo Brasileiro Petrobras | Ecopetrol vs. Equinor ASA ADR | Ecopetrol vs. Eni SpA ADR | Ecopetrol vs. Cenovus Energy |
| Cascades vs. TriMas | Cascades vs. Myers Industries | Cascades vs. Reynolds Consumer Products | Cascades vs. Pactiv Evergreen |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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