Correlation Between Ecopetrol and MOL PLC
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and MOL PLC 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 MOL PLC 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 MOL PLC ADR, you can compare the effects of market volatilities on Ecopetrol and MOL PLC 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 MOL PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and MOL PLC.
Diversification Opportunities for Ecopetrol and MOL PLC
Very poor diversification
The 3 months correlation between Ecopetrol and MOL is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and MOL PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MOL PLC 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 MOL PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MOL PLC ADR has no effect on the direction of Ecopetrol i.e., Ecopetrol and MOL PLC go up and down completely randomly.
Pair Corralation between Ecopetrol and MOL PLC
Allowing for the 90-day total investment horizon Ecopetrol SA ADR is expected to generate 1.22 times more return on investment than MOL PLC. However, Ecopetrol is 1.22 times more volatile than MOL PLC ADR. It trades about 0.03 of its potential returns per unit of risk. MOL PLC ADR is currently generating about -0.06 per unit of risk. If you would invest 797.00 in Ecopetrol SA ADR on August 30, 2024 and sell it today you would earn a total of 7.00 from holding Ecopetrol SA ADR or generate 0.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ecopetrol SA ADR vs. MOL PLC ADR
Performance |
| Timeline |
| Ecopetrol SA ADR |
| MOL PLC ADR |
Ecopetrol and MOL PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and MOL PLC
The main advantage of trading using opposite Ecopetrol and MOL PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, MOL PLC 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 MOL PLC will offset losses from the drop in MOL PLC's long position.| Ecopetrol vs. BP PLC ADR | Ecopetrol vs. Shell PLC ADR | Ecopetrol vs. Petroleo Brasileiro Petrobras | Ecopetrol vs. Suncor Energy |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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