Correlation Between Ecopetrol and SGS SA
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and SGS SA 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 SGS SA 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 SGS SA, you can compare the effects of market volatilities on Ecopetrol and SGS SA 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 SGS SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and SGS SA.
Diversification Opportunities for Ecopetrol and SGS SA
Poor diversification
The 3 months correlation between Ecopetrol and SGS is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and SGS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGS SA 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 SGS SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGS SA has no effect on the direction of Ecopetrol i.e., Ecopetrol and SGS SA go up and down completely randomly.
Pair Corralation between Ecopetrol and SGS SA
Allowing for the 90-day total investment horizon Ecopetrol SA ADR is expected to generate 1.32 times more return on investment than SGS SA. However, Ecopetrol is 1.32 times more volatile than SGS SA. It trades about 0.02 of its potential returns per unit of risk. SGS SA is currently generating about -0.28 per unit of risk. If you would invest 805.00 in Ecopetrol SA ADR on August 27, 2024 and sell it today you would earn a total of 5.00 from holding Ecopetrol SA ADR or generate 0.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ecopetrol SA ADR vs. SGS SA
Performance |
| Timeline |
| Ecopetrol SA ADR |
| SGS SA |
Ecopetrol and SGS SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and SGS SA
The main advantage of trading using opposite Ecopetrol and SGS SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, SGS SA 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 SGS SA will offset losses from the drop in SGS SA's long position.The idea behind Ecopetrol SA ADR and SGS SA 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.| SGS SA vs. Sack Lunch Productions | SGS SA vs. Potash America | SGS SA vs. Dalrada Financial Corp | SGS SA vs. TransUnion |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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