Correlation Between Ecopetrol and DBS Group
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and DBS Group 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 DBS Group 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 DBS Group Holdings, you can compare the effects of market volatilities on Ecopetrol and DBS Group 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 DBS Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and DBS Group.
Diversification Opportunities for Ecopetrol and DBS Group
Pay attention - limited upside
The 3 months correlation between Ecopetrol and DBS is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and DBS Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DBS Group Holdings 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 DBS Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DBS Group Holdings has no effect on the direction of Ecopetrol i.e., Ecopetrol and DBS Group go up and down completely randomly.
Pair Corralation between Ecopetrol and DBS Group
Allowing for the 90-day total investment horizon Ecopetrol SA ADR is expected to under-perform the DBS Group. In addition to that, Ecopetrol is 1.5 times more volatile than DBS Group Holdings. It trades about -0.04 of its total potential returns per unit of risk. DBS Group Holdings is currently generating about 0.15 per unit of volatility. If you would invest 8,139 in DBS Group Holdings on August 26, 2024 and sell it today you would earn a total of 4,358 from holding DBS Group Holdings or generate 53.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ecopetrol SA ADR vs. DBS Group Holdings
Performance |
| Timeline |
| Ecopetrol SA ADR |
| DBS Group Holdings |
Ecopetrol and DBS Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and DBS Group
The main advantage of trading using opposite Ecopetrol and DBS Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, DBS Group 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 DBS Group will offset losses from the drop in DBS Group's long position.The idea behind Ecopetrol SA ADR and DBS Group Holdings 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.| DBS Group vs. KBC Groep NV | DBS Group vs. United Overseas Bank | DBS Group vs. Embassy Bancorp | DBS Group vs. Overseas Chinese Banking |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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