Correlation Between Ecopetrol and Sembcorp Marine
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and Sembcorp Marine 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 Sembcorp Marine 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 Sembcorp Marine, you can compare the effects of market volatilities on Ecopetrol and Sembcorp Marine 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 Sembcorp Marine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and Sembcorp Marine.
Diversification Opportunities for Ecopetrol and Sembcorp Marine
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ecopetrol and Sembcorp is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and Sembcorp Marine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sembcorp Marine 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 Sembcorp Marine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sembcorp Marine has no effect on the direction of Ecopetrol i.e., Ecopetrol and Sembcorp Marine go up and down completely randomly.
Pair Corralation between Ecopetrol and Sembcorp Marine
Allowing for the 90-day total investment horizon Ecopetrol SA ADR is expected to generate 0.32 times more return on investment than Sembcorp Marine. However, Ecopetrol SA ADR is 3.08 times less risky than Sembcorp Marine. It trades about 0.11 of its potential returns per unit of risk. Sembcorp Marine is currently generating about -0.01 per unit of risk. If you would invest 770.00 in Ecopetrol SA ADR on September 1, 2024 and sell it today you would earn a total of 33.00 from holding Ecopetrol SA ADR or generate 4.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Ecopetrol SA ADR vs. Sembcorp Marine
Performance |
| Timeline |
| Ecopetrol SA ADR |
| Sembcorp Marine |
Ecopetrol and Sembcorp Marine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and Sembcorp Marine
The main advantage of trading using opposite Ecopetrol and Sembcorp Marine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, Sembcorp Marine 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 Sembcorp Marine will offset losses from the drop in Sembcorp Marine's long position.| Ecopetrol vs. Shell PLC ADR | Ecopetrol vs. BP PLC ADR | Ecopetrol vs. Suncor Energy | Ecopetrol vs. Equinor ASA ADR |
| Sembcorp Marine vs. Austal Limited | Sembcorp Marine vs. Rolls Royce Holdings PLC | Sembcorp Marine vs. AAR Corp | Sembcorp Marine vs. Eve Holding |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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