Correlation Between Ecopetrol and Singapore Technologies
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and Singapore Technologies 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 Singapore Technologies 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 Singapore Technologies Engineering, you can compare the effects of market volatilities on Ecopetrol and Singapore Technologies 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 Singapore Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and Singapore Technologies.
Diversification Opportunities for Ecopetrol and Singapore Technologies
-0.82 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Ecopetrol and Singapore is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and Singapore Technologies Enginee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore Technologies 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 Singapore Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singapore Technologies has no effect on the direction of Ecopetrol i.e., Ecopetrol and Singapore Technologies go up and down completely randomly.
Pair Corralation between Ecopetrol and Singapore Technologies
Allowing for the 90-day total investment horizon Ecopetrol is expected to generate 2.16 times less return on investment than Singapore Technologies. But when comparing it to its historical volatility, Ecopetrol SA ADR is 1.32 times less risky than Singapore Technologies. It trades about 0.02 of its potential returns per unit of risk. Singapore Technologies Engineering is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 283.00 in Singapore Technologies Engineering on August 27, 2024 and sell it today you would earn a total of 48.00 from holding Singapore Technologies Engineering or generate 16.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 59.78% |
| Values | Daily Returns |
Ecopetrol SA ADR vs. Singapore Technologies Enginee
Performance |
| Timeline |
| Ecopetrol SA ADR |
| Singapore Technologies |
Ecopetrol and Singapore Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and Singapore Technologies
The main advantage of trading using opposite Ecopetrol and Singapore Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, Singapore Technologies 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 Singapore Technologies will offset losses from the drop in Singapore Technologies' long position.The idea behind Ecopetrol SA ADR and Singapore Technologies Engineering 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.| Singapore Technologies vs. Moog Inc | Singapore Technologies vs. BAE Systems PLC | Singapore Technologies vs. Park Electrochemical | Singapore Technologies vs. Triumph Group |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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