Correlation Between Ecopetrol and Magnis Energy
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and Magnis Energy 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 Magnis Energy 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 Magnis Energy Technologies, you can compare the effects of market volatilities on Ecopetrol and Magnis Energy 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 Magnis Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and Magnis Energy.
Diversification Opportunities for Ecopetrol and Magnis Energy
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ecopetrol and Magnis is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and Magnis Energy Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnis Energy Techno 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 Magnis Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magnis Energy Techno has no effect on the direction of Ecopetrol i.e., Ecopetrol and Magnis Energy go up and down completely randomly.
Pair Corralation between Ecopetrol and Magnis Energy
Allowing for the 90-day total investment horizon Ecopetrol is expected to generate 103.15 times less return on investment than Magnis Energy. But when comparing it to its historical volatility, Ecopetrol SA ADR is 8.61 times less risky than Magnis Energy. It trades about 0.01 of its potential returns per unit of risk. Magnis Energy Technologies is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 3.00 in Magnis Energy Technologies on August 29, 2024 and sell it today you would earn a total of 0.00 from holding Magnis Energy Technologies or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Ecopetrol SA ADR vs. Magnis Energy Technologies
Performance |
| Timeline |
| Ecopetrol SA ADR |
| Magnis Energy Techno |
Ecopetrol and Magnis Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and Magnis Energy
The main advantage of trading using opposite Ecopetrol and Magnis Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, Magnis Energy 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 Magnis Energy will offset losses from the drop in Magnis Energy's long position.| Ecopetrol vs. Petroleo Brasileiro Petrobras | Ecopetrol vs. Equinor ASA ADR | Ecopetrol vs. Eni SpA ADR | Ecopetrol vs. Cenovus Energy |
| Magnis Energy vs. Novonix Ltd ADR | Magnis Energy vs. Ilika plc | Magnis Energy vs. FuelPositive Corp | Magnis Energy vs. Novonix |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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