Correlation Between Ecopetrol and CVR Energy
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and CVR 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 CVR 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 CVR Energy, you can compare the effects of market volatilities on Ecopetrol and CVR 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 CVR Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and CVR Energy.
Diversification Opportunities for Ecopetrol and CVR Energy
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ecopetrol and CVR is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and CVR Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVR 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 CVR Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVR Energy has no effect on the direction of Ecopetrol i.e., Ecopetrol and CVR Energy go up and down completely randomly.
Pair Corralation between Ecopetrol and CVR Energy
Allowing for the 90-day total investment horizon Ecopetrol SA ADR is expected to generate 0.73 times more return on investment than CVR Energy. However, Ecopetrol SA ADR is 1.37 times less risky than CVR Energy. It trades about 0.04 of its potential returns per unit of risk. CVR Energy is currently generating about -0.01 per unit of risk. If you would invest 643.00 in Ecopetrol SA ADR on August 27, 2024 and sell it today you would earn a total of 190.00 from holding Ecopetrol SA ADR or generate 29.55% 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. CVR Energy
Performance |
| Timeline |
| Ecopetrol SA ADR |
| CVR Energy |
Ecopetrol and CVR Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and CVR Energy
The main advantage of trading using opposite Ecopetrol and CVR Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, CVR 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 CVR Energy will offset losses from the drop in CVR Energy's long position.The idea behind Ecopetrol SA ADR and CVR Energy 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.| CVR Energy vs. Delek Logistics Partners | CVR Energy vs. PBF Energy | CVR Energy vs. HF Sinclair Corp | CVR Energy vs. Par Pacific Holdings |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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