Correlation Between Ecopetrol and LianBio ADR
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and LianBio ADR 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 LianBio ADR 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 LianBio ADR, you can compare the effects of market volatilities on Ecopetrol and LianBio ADR 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 LianBio ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and LianBio ADR.
Diversification Opportunities for Ecopetrol and LianBio ADR
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ecopetrol and LianBio is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and LianBio ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LianBio 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 LianBio ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LianBio ADR has no effect on the direction of Ecopetrol i.e., Ecopetrol and LianBio ADR go up and down completely randomly.
Pair Corralation between Ecopetrol and LianBio ADR
Allowing for the 90-day total investment horizon Ecopetrol is expected to generate 4.76 times less return on investment than LianBio ADR. But when comparing it to its historical volatility, Ecopetrol SA ADR is 2.49 times less risky than LianBio ADR. It trades about 0.04 of its potential returns per unit of risk. LianBio ADR is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 149.00 in LianBio ADR on August 24, 2024 and sell it today you would earn a total of 69.00 from holding LianBio ADR or generate 46.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 32.06% |
| Values | Daily Returns |
Ecopetrol SA ADR vs. LianBio ADR
Performance |
| Timeline |
| Ecopetrol SA ADR |
| LianBio ADR |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Ecopetrol and LianBio ADR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and LianBio ADR
The main advantage of trading using opposite Ecopetrol and LianBio ADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, LianBio ADR 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 LianBio ADR will offset losses from the drop in LianBio ADR's long position.| Ecopetrol vs. Eshallgo Class A | Ecopetrol vs. Amtech Systems | Ecopetrol vs. Gold Fields Ltd | Ecopetrol vs. Aegean Airlines SA |
| LianBio ADR vs. Sensei Biotherapeutics | LianBio ADR vs. NextCure | LianBio ADR vs. Nuvation Bio | LianBio ADR vs. Inozyme Pharma |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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