Correlation Between Ecopetrol and Rolls Royce
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and Rolls Royce 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 Rolls Royce 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 Rolls Royce Holdings, you can compare the effects of market volatilities on Ecopetrol and Rolls Royce 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 Rolls Royce. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and Rolls Royce.
Diversification Opportunities for Ecopetrol and Rolls Royce
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ecopetrol and Rolls is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and Rolls Royce Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rolls Royce Holdings 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 Rolls Royce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rolls Royce Holdings has no effect on the direction of Ecopetrol i.e., Ecopetrol and Rolls Royce go up and down completely randomly.
Pair Corralation between Ecopetrol and Rolls Royce
Allowing for the 90-day total investment horizon Ecopetrol SA ADR is expected to generate 1.25 times more return on investment than Rolls Royce. However, Ecopetrol is 1.25 times more volatile than Rolls Royce Holdings. It trades about 0.11 of its potential returns per unit of risk. Rolls Royce Holdings is currently generating about -0.08 per unit of risk. If you would invest 770.00 in Ecopetrol SA ADR on September 1, 2024 and sell it today you would earn a total of 33.00 from holding Ecopetrol SA ADR or generate 4.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ecopetrol SA ADR vs. Rolls Royce Holdings
Performance |
| Timeline |
| Ecopetrol SA ADR |
| Rolls Royce Holdings |
Ecopetrol and Rolls Royce Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and Rolls Royce
The main advantage of trading using opposite Ecopetrol and Rolls Royce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, Rolls Royce 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 Rolls Royce will offset losses from the drop in Rolls Royce's long position.| Ecopetrol vs. Shell PLC ADR | Ecopetrol vs. BP PLC ADR | Ecopetrol vs. Suncor Energy | Ecopetrol vs. Equinor ASA ADR |
| Rolls Royce vs. Eve Holding | Rolls Royce vs. Rolls Royce Holdings PLC | Rolls Royce vs. Sembcorp Marine | Rolls Royce vs. HEICO |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
Other Complementary Tools
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data |