Correlation Between Ecopetrol and SANUWAVE Health
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and SANUWAVE Health 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 SANUWAVE Health 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 SANUWAVE Health, you can compare the effects of market volatilities on Ecopetrol and SANUWAVE Health 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 SANUWAVE Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and SANUWAVE Health.
Diversification Opportunities for Ecopetrol and SANUWAVE Health
-0.86 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Ecopetrol and SANUWAVE is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and SANUWAVE Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SANUWAVE Health 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 SANUWAVE Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SANUWAVE Health has no effect on the direction of Ecopetrol i.e., Ecopetrol and SANUWAVE Health go up and down completely randomly.
Pair Corralation between Ecopetrol and SANUWAVE Health
Allowing for the 90-day total investment horizon Ecopetrol SA ADR is expected to under-perform the SANUWAVE Health. But the stock apears to be less risky and, when comparing its historical volatility, Ecopetrol SA ADR is 4.33 times less risky than SANUWAVE Health. The stock trades about -0.13 of its potential returns per unit of risk. The SANUWAVE Health is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 559.00 in SANUWAVE Health on September 2, 2024 and sell it today you would earn a total of 1,541 from holding SANUWAVE Health or generate 275.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ecopetrol SA ADR vs. SANUWAVE Health
Performance |
| Timeline |
| Ecopetrol SA ADR |
| SANUWAVE Health |
Ecopetrol and SANUWAVE Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and SANUWAVE Health
The main advantage of trading using opposite Ecopetrol and SANUWAVE Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, SANUWAVE Health 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 SANUWAVE Health will offset losses from the drop in SANUWAVE Health's long position.The idea behind Ecopetrol SA ADR and SANUWAVE Health 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.| SANUWAVE Health vs. Brainsway | SANUWAVE Health vs. Venus Concept | SANUWAVE Health vs. Tactile Systems Technology | SANUWAVE Health vs. Icecure Medical |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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