Correlation Between Ecopetrol and Naspers
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and Naspers 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 Naspers 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 Naspers Limited, you can compare the effects of market volatilities on Ecopetrol and Naspers 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 Naspers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and Naspers.
Diversification Opportunities for Ecopetrol and Naspers
Excellent diversification
The 3 months correlation between Ecopetrol and Naspers is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and Naspers Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naspers Limited 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 Naspers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naspers Limited has no effect on the direction of Ecopetrol i.e., Ecopetrol and Naspers go up and down completely randomly.
Pair Corralation between Ecopetrol and Naspers
Allowing for the 90-day total investment horizon Ecopetrol SA ADR is expected to generate 1.19 times more return on investment than Naspers. However, Ecopetrol is 1.19 times more volatile than Naspers Limited. It trades about 0.06 of its potential returns per unit of risk. Naspers Limited is currently generating about -0.06 per unit of risk. If you would invest 801.00 in Ecopetrol SA ADR on August 24, 2024 and sell it today you would earn a total of 18.00 from holding Ecopetrol SA ADR or generate 2.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Ecopetrol SA ADR vs. Naspers Limited
Performance |
| Timeline |
| Ecopetrol SA ADR |
| Naspers Limited |
Ecopetrol and Naspers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and Naspers
The main advantage of trading using opposite Ecopetrol and Naspers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, Naspers 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 Naspers will offset losses from the drop in Naspers' long position.| Ecopetrol vs. Eshallgo Class A | Ecopetrol vs. Amtech Systems | Ecopetrol vs. Gold Fields Ltd | Ecopetrol vs. Aegean Airlines SA |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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