Correlation Between Ecopetrol and Schibsted ASA
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and Schibsted ASA 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 Schibsted ASA 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 Schibsted ASA ADR, you can compare the effects of market volatilities on Ecopetrol and Schibsted ASA 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 Schibsted ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and Schibsted ASA.
Diversification Opportunities for Ecopetrol and Schibsted ASA
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Ecopetrol and Schibsted is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and Schibsted ASA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schibsted ASA ADR 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 Schibsted ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schibsted ASA ADR has no effect on the direction of Ecopetrol i.e., Ecopetrol and Schibsted ASA go up and down completely randomly.
Pair Corralation between Ecopetrol and Schibsted ASA
Allowing for the 90-day total investment horizon Ecopetrol is expected to generate 6.22 times less return on investment than Schibsted ASA. But when comparing it to its historical volatility, Ecopetrol SA ADR is 3.9 times less risky than Schibsted ASA. It trades about 0.03 of its potential returns per unit of risk. Schibsted ASA ADR is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,855 in Schibsted ASA ADR on September 2, 2024 and sell it today you would earn a total of 1,299 from holding Schibsted ASA ADR or generate 70.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 82.66% |
| Values | Daily Returns |
Ecopetrol SA ADR vs. Schibsted ASA ADR
Performance |
| Timeline |
| Ecopetrol SA ADR |
| Schibsted ASA ADR |
Ecopetrol and Schibsted ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and Schibsted ASA
The main advantage of trading using opposite Ecopetrol and Schibsted ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, Schibsted ASA 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 Schibsted ASA will offset losses from the drop in Schibsted ASA's long position.The idea behind Ecopetrol SA ADR and Schibsted ASA ADR 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.| Schibsted ASA vs. Slate Office REIT | Schibsted ASA vs. HUMANA INC | Schibsted ASA vs. Aquagold International | Schibsted ASA vs. Barloworld Ltd ADR |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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