Correlation Between Ecopetrol and Leap Therapeutics
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and Leap Therapeutics 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 Leap Therapeutics 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 Leap Therapeutics, you can compare the effects of market volatilities on Ecopetrol and Leap Therapeutics 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 Leap Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and Leap Therapeutics.
Diversification Opportunities for Ecopetrol and Leap Therapeutics
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ecopetrol and Leap is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and Leap Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leap Therapeutics 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 Leap Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leap Therapeutics has no effect on the direction of Ecopetrol i.e., Ecopetrol and Leap Therapeutics go up and down completely randomly.
Pair Corralation between Ecopetrol and Leap Therapeutics
Allowing for the 90-day total investment horizon Ecopetrol SA ADR is expected to under-perform the Leap Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Ecopetrol SA ADR is 3.08 times less risky than Leap Therapeutics. The stock trades about -0.06 of its potential returns per unit of risk. The Leap Therapeutics is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 300.00 in Leap Therapeutics on August 28, 2024 and sell it today you would lose (48.00) from holding Leap Therapeutics or give up 16.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ecopetrol SA ADR vs. Leap Therapeutics
Performance |
| Timeline |
| Ecopetrol SA ADR |
| Leap Therapeutics |
Ecopetrol and Leap Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and Leap Therapeutics
The main advantage of trading using opposite Ecopetrol and Leap Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, Leap Therapeutics 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 Leap Therapeutics will offset losses from the drop in Leap Therapeutics' long position.The idea behind Ecopetrol SA ADR and Leap Therapeutics 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.| Leap Therapeutics vs. X4 Pharmaceuticals | Leap Therapeutics vs. Terns Pharmaceuticals | Leap Therapeutics vs. Day One Biopharmaceuticals | Leap Therapeutics vs. PDS Biotechnology 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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