Correlation Between Ecopetrol and Galp Energia
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and Galp Energia 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 Galp Energia 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 Galp Energia SGPS, you can compare the effects of market volatilities on Ecopetrol and Galp Energia 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 Galp Energia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and Galp Energia.
Diversification Opportunities for Ecopetrol and Galp Energia
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ecopetrol and Galp is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and Galp Energia SGPS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galp Energia SGPS 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 Galp Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galp Energia SGPS has no effect on the direction of Ecopetrol i.e., Ecopetrol and Galp Energia go up and down completely randomly.
Pair Corralation between Ecopetrol and Galp Energia
Allowing for the 90-day total investment horizon Ecopetrol is expected to generate 2.5 times less return on investment than Galp Energia. But when comparing it to its historical volatility, Ecopetrol SA ADR is 2.24 times less risky than Galp Energia. It trades about 0.04 of its potential returns per unit of risk. Galp Energia SGPS is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,213 in Galp Energia SGPS on August 24, 2024 and sell it today you would earn a total of 439.00 from holding Galp Energia SGPS or generate 36.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 69.96% |
| Values | Daily Returns |
Ecopetrol SA ADR vs. Galp Energia SGPS
Performance |
| Timeline |
| Ecopetrol SA ADR |
| Galp Energia SGPS |
Ecopetrol and Galp Energia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and Galp Energia
The main advantage of trading using opposite Ecopetrol and Galp Energia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, Galp Energia 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 Galp Energia will offset losses from the drop in Galp Energia's long position.| Ecopetrol vs. Eshallgo Class A | Ecopetrol vs. Amtech Systems | Ecopetrol vs. Gold Fields Ltd | Ecopetrol vs. Aegean Airlines SA |
| Galp Energia vs. Equinor ASA ADR | Galp Energia vs. TotalEnergies SE ADR | Galp Energia vs. Ecopetrol SA ADR | Galp Energia vs. National Fuel Gas |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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