Correlation Between Ecopetrol and ESSA Pharma
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and ESSA Pharma 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 ESSA Pharma 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 ESSA Pharma, you can compare the effects of market volatilities on Ecopetrol and ESSA Pharma 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 ESSA Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and ESSA Pharma.
Diversification Opportunities for Ecopetrol and ESSA Pharma
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ecopetrol and ESSA is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and ESSA Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESSA Pharma 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 ESSA Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESSA Pharma has no effect on the direction of Ecopetrol i.e., Ecopetrol and ESSA Pharma go up and down completely randomly.
Pair Corralation between Ecopetrol and ESSA Pharma
Allowing for the 90-day total investment horizon Ecopetrol is expected to generate 1.65 times less return on investment than ESSA Pharma. But when comparing it to its historical volatility, Ecopetrol SA ADR is 2.91 times less risky than ESSA Pharma. It trades about 0.03 of its potential returns per unit of risk. ESSA Pharma is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 325.00 in ESSA Pharma on August 30, 2024 and sell it today you would lose (146.00) from holding ESSA Pharma or give up 44.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ecopetrol SA ADR vs. ESSA Pharma
Performance |
| Timeline |
| Ecopetrol SA ADR |
| ESSA Pharma |
Ecopetrol and ESSA Pharma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and ESSA Pharma
The main advantage of trading using opposite Ecopetrol and ESSA Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, ESSA Pharma 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 ESSA Pharma will offset losses from the drop in ESSA Pharma's long position.| Ecopetrol vs. BP PLC ADR | Ecopetrol vs. Shell PLC ADR | Ecopetrol vs. Petroleo Brasileiro Petrobras | Ecopetrol vs. Suncor Energy |
| ESSA Pharma vs. Ikena Oncology | ESSA Pharma vs. Eliem Therapeutics | ESSA Pharma vs. HCW Biologics | ESSA Pharma vs. RenovoRx |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
Other Complementary Tools
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges |