Correlation Between Ecopetrol and Sanlam
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and Sanlam 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 Sanlam 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 Sanlam Ltd PK, you can compare the effects of market volatilities on Ecopetrol and Sanlam 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 Sanlam. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and Sanlam.
Diversification Opportunities for Ecopetrol and Sanlam
Very good diversification
The 3 months correlation between Ecopetrol and Sanlam is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and Sanlam Ltd PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanlam Ltd PK 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 Sanlam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanlam Ltd PK has no effect on the direction of Ecopetrol i.e., Ecopetrol and Sanlam go up and down completely randomly.
Pair Corralation between Ecopetrol and Sanlam
Allowing for the 90-day total investment horizon Ecopetrol SA ADR is expected to generate 1.27 times more return on investment than Sanlam. However, Ecopetrol is 1.27 times more volatile than Sanlam Ltd PK. It trades about 0.06 of its potential returns per unit of risk. Sanlam Ltd PK is currently generating about 0.07 per unit of risk. If you would invest 801.00 in Ecopetrol SA ADR on August 24, 2024 and sell it today you would earn a total of 18.00 from holding Ecopetrol SA ADR or generate 2.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ecopetrol SA ADR vs. Sanlam Ltd PK
Performance |
| Timeline |
| Ecopetrol SA ADR |
| Sanlam Ltd PK |
Ecopetrol and Sanlam Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and Sanlam
The main advantage of trading using opposite Ecopetrol and Sanlam positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, Sanlam 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 Sanlam will offset losses from the drop in Sanlam's long position.| Ecopetrol vs. Eshallgo Class A | Ecopetrol vs. Amtech Systems | Ecopetrol vs. Gold Fields Ltd | Ecopetrol vs. Aegean Airlines SA |
| Sanlam vs. Ping An Insurance | Sanlam vs. CNO Financial Group | Sanlam vs. Genworth Financial | Sanlam vs. MetLife Preferred Stock |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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