Correlation Between Ecopetrol and SAB Biotherapeutics
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and SAB Biotherapeutics 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 SAB Biotherapeutics 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 SAB Biotherapeutics, you can compare the effects of market volatilities on Ecopetrol and SAB Biotherapeutics 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 SAB Biotherapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and SAB Biotherapeutics.
Diversification Opportunities for Ecopetrol and SAB Biotherapeutics
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ecopetrol and SAB is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and SAB Biotherapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAB Biotherapeutics 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 SAB Biotherapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAB Biotherapeutics has no effect on the direction of Ecopetrol i.e., Ecopetrol and SAB Biotherapeutics go up and down completely randomly.
Pair Corralation between Ecopetrol and SAB Biotherapeutics
Allowing for the 90-day total investment horizon Ecopetrol is expected to generate 10.81 times less return on investment than SAB Biotherapeutics. But when comparing it to its historical volatility, Ecopetrol SA ADR is 4.19 times less risky than SAB Biotherapeutics. It trades about 0.02 of its potential returns per unit of risk. SAB Biotherapeutics is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 292.00 in SAB Biotherapeutics on August 28, 2024 and sell it today you would earn a total of 11.00 from holding SAB Biotherapeutics or generate 3.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ecopetrol SA ADR vs. SAB Biotherapeutics
Performance |
| Timeline |
| Ecopetrol SA ADR |
| SAB Biotherapeutics |
Ecopetrol and SAB Biotherapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and SAB Biotherapeutics
The main advantage of trading using opposite Ecopetrol and SAB Biotherapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, SAB Biotherapeutics 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 SAB Biotherapeutics will offset losses from the drop in SAB Biotherapeutics' long position.The idea behind Ecopetrol SA ADR and SAB Biotherapeutics pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| SAB Biotherapeutics vs. Processa Pharmaceuticals | SAB Biotherapeutics vs. Third Harmonic Bio | SAB Biotherapeutics vs. Cingulate Warrants | SAB Biotherapeutics vs. Anebulo Pharmaceuticals |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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