Correlation Between Ecopetrol and Equinor ASA
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and Equinor ASA 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 Equinor ASA 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 Equinor ASA, you can compare the effects of market volatilities on Ecopetrol and Equinor ASA 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 Equinor ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and Equinor ASA.
Diversification Opportunities for Ecopetrol and Equinor ASA
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ecopetrol and Equinor is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and Equinor ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinor ASA 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 Equinor ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equinor ASA has no effect on the direction of Ecopetrol i.e., Ecopetrol and Equinor ASA go up and down completely randomly.
Pair Corralation between Ecopetrol and Equinor ASA
Allowing for the 90-day total investment horizon Ecopetrol is expected to generate 3.49 times less return on investment than Equinor ASA. But when comparing it to its historical volatility, Ecopetrol SA ADR is 1.33 times less risky than Equinor ASA. It trades about 0.03 of its potential returns per unit of risk. Equinor ASA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,352 in Equinor ASA on August 30, 2024 and sell it today you would earn a total of 91.00 from holding Equinor ASA or generate 3.87% 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. Equinor ASA
Performance |
| Timeline |
| Ecopetrol SA ADR |
| Equinor ASA |
Ecopetrol and Equinor ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and Equinor ASA
The main advantage of trading using opposite Ecopetrol and Equinor ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, Equinor ASA 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 Equinor ASA will offset losses from the drop in Equinor ASA's long position.| Ecopetrol vs. BP PLC ADR | Ecopetrol vs. Shell PLC ADR | Ecopetrol vs. Petroleo Brasileiro Petrobras | Ecopetrol vs. Suncor Energy |
| Equinor ASA vs. China Petroleum Chemical | Equinor ASA vs. Galp Energa | Equinor ASA vs. Exxon Mobil Corp | Equinor ASA vs. Eni SpA |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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