Correlation Between Ecopetrol and Cohu
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and Cohu 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 Cohu 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 Cohu Inc, you can compare the effects of market volatilities on Ecopetrol and Cohu 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 Cohu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and Cohu.
Diversification Opportunities for Ecopetrol and Cohu
Very good diversification
The 3 months correlation between Ecopetrol and Cohu is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and Cohu Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cohu Inc 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 Cohu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cohu Inc has no effect on the direction of Ecopetrol i.e., Ecopetrol and Cohu go up and down completely randomly.
Pair Corralation between Ecopetrol and Cohu
Allowing for the 90-day total investment horizon Ecopetrol is expected to generate 3.1 times less return on investment than Cohu. But when comparing it to its historical volatility, Ecopetrol SA ADR is 1.55 times less risky than Cohu. It trades about 0.02 of its potential returns per unit of risk. Cohu Inc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,647 in Cohu Inc on August 27, 2024 and sell it today you would earn a total of 60.00 from holding Cohu Inc or generate 2.27% 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. Cohu Inc
Performance |
| Timeline |
| Ecopetrol SA ADR |
| Cohu Inc |
Ecopetrol and Cohu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and Cohu
The main advantage of trading using opposite Ecopetrol and Cohu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, Cohu 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 Cohu will offset losses from the drop in Cohu's long position.The idea behind Ecopetrol SA ADR and Cohu Inc 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.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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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