Correlation Between Ecopetrol and SINOPHARM GROUP
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and SINOPHARM GROUP 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 SINOPHARM GROUP 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 SINOPHARM GROUP LTD, you can compare the effects of market volatilities on Ecopetrol and SINOPHARM GROUP 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 SINOPHARM GROUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and SINOPHARM GROUP.
Diversification Opportunities for Ecopetrol and SINOPHARM GROUP
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ecopetrol and SINOPHARM is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and SINOPHARM GROUP LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SINOPHARM GROUP LTD 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 SINOPHARM GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SINOPHARM GROUP LTD has no effect on the direction of Ecopetrol i.e., Ecopetrol and SINOPHARM GROUP go up and down completely randomly.
Pair Corralation between Ecopetrol and SINOPHARM GROUP
Allowing for the 90-day total investment horizon Ecopetrol is expected to generate 1.3 times less return on investment than SINOPHARM GROUP. But when comparing it to its historical volatility, Ecopetrol SA ADR is 1.19 times less risky than SINOPHARM GROUP. It trades about 0.14 of its potential returns per unit of risk. SINOPHARM GROUP LTD is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,260 in SINOPHARM GROUP LTD on September 2, 2024 and sell it today you would earn a total of 93.00 from holding SINOPHARM GROUP LTD or generate 7.38% 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. SINOPHARM GROUP LTD
Performance |
| Timeline |
| Ecopetrol SA ADR |
| SINOPHARM GROUP LTD |
Ecopetrol and SINOPHARM GROUP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and SINOPHARM GROUP
The main advantage of trading using opposite Ecopetrol and SINOPHARM GROUP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, SINOPHARM GROUP 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 SINOPHARM GROUP will offset losses from the drop in SINOPHARM GROUP's long position.The idea behind Ecopetrol SA ADR and SINOPHARM GROUP LTD 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.| SINOPHARM GROUP vs. Cardinal Health | SINOPHARM GROUP vs. Henry Schein | SINOPHARM GROUP vs. Owens Minor | SINOPHARM GROUP vs. Patterson Companies |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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