Correlation Between Ecopetrol and Regis Resources
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and Regis Resources 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 Regis Resources 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 Regis Resources, you can compare the effects of market volatilities on Ecopetrol and Regis Resources 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 Regis Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and Regis Resources.
Diversification Opportunities for Ecopetrol and Regis Resources
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ecopetrol and Regis is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and Regis Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regis Resources 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 Regis Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regis Resources has no effect on the direction of Ecopetrol i.e., Ecopetrol and Regis Resources go up and down completely randomly.
Pair Corralation between Ecopetrol and Regis Resources
Allowing for the 90-day total investment horizon Ecopetrol is expected to generate 1.05 times less return on investment than Regis Resources. But when comparing it to its historical volatility, Ecopetrol SA ADR is 1.9 times less risky than Regis Resources. It trades about 0.46 of its potential returns per unit of risk. Regis Resources is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 154.00 in Regis Resources on November 1, 2024 and sell it today you would earn a total of 32.00 from holding Regis Resources or generate 20.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Ecopetrol SA ADR vs. Regis Resources
Performance |
| Timeline |
| Ecopetrol SA ADR |
| Regis Resources |
Ecopetrol and Regis Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and Regis Resources
The main advantage of trading using opposite Ecopetrol and Regis Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, Regis Resources 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 Regis Resources will offset losses from the drop in Regis Resources' long position.| Ecopetrol vs. BP PLC ADR | Ecopetrol vs. Shell PLC ADR | Ecopetrol vs. Petroleo Brasileiro Petrobras | Ecopetrol vs. Suncor Energy |
| Regis Resources vs. Centerra Gold | Regis Resources vs. Southern Arc Minerals | Regis Resources vs. Coeur Mining | Regis Resources vs. Kinross Gold |
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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