Correlation Between Ecopetrol and Merchants Bancorp
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and Merchants Bancorp 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 Merchants Bancorp 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 Merchants Bancorp PR, you can compare the effects of market volatilities on Ecopetrol and Merchants Bancorp 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 Merchants Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and Merchants Bancorp.
Diversification Opportunities for Ecopetrol and Merchants Bancorp
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ecopetrol and Merchants is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and Merchants Bancorp PR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants Bancorp 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 Merchants Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merchants Bancorp has no effect on the direction of Ecopetrol i.e., Ecopetrol and Merchants Bancorp go up and down completely randomly.
Pair Corralation between Ecopetrol and Merchants Bancorp
If you would invest 761.00 in Ecopetrol SA ADR on September 3, 2024 and sell it today you would earn a total of 42.00 from holding Ecopetrol SA ADR or generate 5.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 5.0% |
| Values | Daily Returns |
Ecopetrol SA ADR vs. Merchants Bancorp PR
Performance |
| Timeline |
| Ecopetrol SA ADR |
| Merchants Bancorp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Ecopetrol and Merchants Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and Merchants Bancorp
The main advantage of trading using opposite Ecopetrol and Merchants Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, Merchants Bancorp 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 Merchants Bancorp will offset losses from the drop in Merchants Bancorp's long position.| Ecopetrol vs. Petroleo Brasileiro Petrobras | Ecopetrol vs. Equinor ASA ADR | Ecopetrol vs. Eni SpA ADR | Ecopetrol vs. Cenovus Energy |
| Merchants Bancorp vs. Merchants Bancorp | Merchants Bancorp vs. Valley National Bancorp | Merchants Bancorp vs. Valley National Bancorp | Merchants Bancorp vs. Wintrust 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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