Correlation Between Ecopetrol and First National
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and First National 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 First National 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 First National of, you can compare the effects of market volatilities on Ecopetrol and First National 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 First National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and First National.
Diversification Opportunities for Ecopetrol and First National
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ecopetrol and First is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and First National of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First National 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 First National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First National has no effect on the direction of Ecopetrol i.e., Ecopetrol and First National go up and down completely randomly.
Pair Corralation between Ecopetrol and First National
Allowing for the 90-day total investment horizon Ecopetrol SA ADR is expected to generate 0.95 times more return on investment than First National. However, Ecopetrol SA ADR is 1.05 times less risky than First National. It trades about 0.02 of its potential returns per unit of risk. First National of is currently generating about -0.01 per unit of risk. If you would invest 750.00 in Ecopetrol SA ADR on August 27, 2024 and sell it today you would earn a total of 83.00 from holding Ecopetrol SA ADR or generate 11.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 80.66% |
| Values | Daily Returns |
Ecopetrol SA ADR vs. First National of
Performance |
| Timeline |
| Ecopetrol SA ADR |
| First National |
Ecopetrol and First National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and First National
The main advantage of trading using opposite Ecopetrol and First National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, First National 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 First National will offset losses from the drop in First National's long position.The idea behind Ecopetrol SA ADR and First National of 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.| First National vs. Washington Business Bank | First National vs. National Capital Bank | First National vs. Community Heritage Financial | First National vs. Citizens Financial Corp |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
Other Complementary Tools
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins |