Correlation Between Ecopetrol and Eni SPA
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and Eni SPA 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 Eni SPA 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 Eni SpA ADR, you can compare the effects of market volatilities on Ecopetrol and Eni SPA 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 Eni SPA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and Eni SPA.
Diversification Opportunities for Ecopetrol and Eni SPA
Poor diversification
The 3 months correlation between Ecopetrol and Eni is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and Eni SpA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eni SpA ADR 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 Eni SPA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eni SpA ADR has no effect on the direction of Ecopetrol i.e., Ecopetrol and Eni SPA go up and down completely randomly.
Pair Corralation between Ecopetrol and Eni SPA
Allowing for the 90-day total investment horizon Ecopetrol SA ADR is expected to generate 1.88 times more return on investment than Eni SPA. However, Ecopetrol is 1.88 times more volatile than Eni SpA ADR. It trades about 0.02 of its potential returns per unit of risk. Eni SpA ADR is currently generating about -0.18 per unit of risk. If you would invest 805.00 in Ecopetrol SA ADR on August 28, 2024 and sell it today you would earn a total of 5.00 from holding Ecopetrol SA ADR or generate 0.62% 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. Eni SpA ADR
Performance |
| Timeline |
| Ecopetrol SA ADR |
| Eni SpA ADR |
Ecopetrol and Eni SPA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and Eni SPA
The main advantage of trading using opposite Ecopetrol and Eni SPA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, Eni SPA 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 Eni SPA will offset losses from the drop in Eni SPA's long position.The idea behind Ecopetrol SA ADR and Eni SpA ADR 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.| Eni SPA vs. TotalEnergies SE ADR | Eni SPA vs. Ecopetrol SA ADR | Eni SPA vs. Shell PLC ADR | Eni SPA vs. Petroleo Brasileiro Petrobras |
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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
Other Complementary Tools
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Commodity Directory Find actively traded commodities issued by global exchanges |