Correlation Between Ecopetrol and Voestalpine
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and Voestalpine 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 Voestalpine 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 Voestalpine AG PK, you can compare the effects of market volatilities on Ecopetrol and Voestalpine 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 Voestalpine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and Voestalpine.
Diversification Opportunities for Ecopetrol and Voestalpine
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ecopetrol and Voestalpine is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and Voestalpine AG PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voestalpine AG 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 Voestalpine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voestalpine AG PK has no effect on the direction of Ecopetrol i.e., Ecopetrol and Voestalpine go up and down completely randomly.
Pair Corralation between Ecopetrol and Voestalpine
Allowing for the 90-day total investment horizon Ecopetrol SA ADR is expected to under-perform the Voestalpine. But the stock apears to be less risky and, when comparing its historical volatility, Ecopetrol SA ADR is 1.4 times less risky than Voestalpine. The stock trades about -0.13 of its potential returns per unit of risk. The Voestalpine AG PK is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 368.00 in Voestalpine AG PK on September 21, 2024 and sell it today you would lose (12.00) from holding Voestalpine AG PK or give up 3.26% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ecopetrol SA ADR vs. Voestalpine AG PK
Performance |
| Timeline |
| Ecopetrol SA ADR |
| Voestalpine AG PK |
Ecopetrol and Voestalpine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and Voestalpine
The main advantage of trading using opposite Ecopetrol and Voestalpine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, Voestalpine 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 Voestalpine will offset losses from the drop in Voestalpine's long position.| Ecopetrol vs. Aquagold International | Ecopetrol vs. Thrivent High Yield | Ecopetrol vs. Morningstar Unconstrained Allocation | Ecopetrol vs. Via Renewables |
| Voestalpine vs. Gerdau SA ADR | Voestalpine vs. Usinas Siderurgicas de | Voestalpine vs. Ternium SA ADR | Voestalpine vs. POSCO Holdings |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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