Correlation Between Ecopetrol and NexGen Energy
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and NexGen 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 NexGen 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 NexGen Energy, you can compare the effects of market volatilities on Ecopetrol and NexGen 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 NexGen Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and NexGen Energy.
Diversification Opportunities for Ecopetrol and NexGen Energy
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Ecopetrol and NexGen is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and NexGen Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NexGen Energy 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 NexGen Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NexGen Energy has no effect on the direction of Ecopetrol i.e., Ecopetrol and NexGen Energy go up and down completely randomly.
Pair Corralation between Ecopetrol and NexGen Energy
Allowing for the 90-day total investment horizon Ecopetrol is expected to generate 9.1 times less return on investment than NexGen Energy. But when comparing it to its historical volatility, Ecopetrol SA ADR is 1.63 times less risky than NexGen Energy. It trades about 0.03 of its potential returns per unit of risk. NexGen Energy is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 750.00 in NexGen Energy on August 30, 2024 and sell it today you would earn a total of 81.00 from holding NexGen Energy or generate 10.8% 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. NexGen Energy
Performance |
| Timeline |
| Ecopetrol SA ADR |
| NexGen Energy |
Ecopetrol and NexGen Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and NexGen Energy
The main advantage of trading using opposite Ecopetrol and NexGen Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, NexGen 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 NexGen Energy will offset losses from the drop in NexGen Energy's long position.| Ecopetrol vs. BP PLC ADR | Ecopetrol vs. Shell PLC ADR | Ecopetrol vs. Petroleo Brasileiro Petrobras | Ecopetrol vs. Suncor Energy |
| NexGen Energy vs. Energy Fuels | NexGen Energy vs. Uranium Energy Corp | NexGen Energy vs. Cameco Corp | NexGen Energy vs. Ur 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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