Correlation Between Ecopetrol and Invesco Municipal
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and Invesco Municipal 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 Invesco Municipal 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 Invesco Municipal Opportunity, you can compare the effects of market volatilities on Ecopetrol and Invesco Municipal 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 Invesco Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and Invesco Municipal.
Diversification Opportunities for Ecopetrol and Invesco Municipal
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ecopetrol and Invesco is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and Invesco Municipal Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Municipal 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 Invesco Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Municipal has no effect on the direction of Ecopetrol i.e., Ecopetrol and Invesco Municipal go up and down completely randomly.
Pair Corralation between Ecopetrol and Invesco Municipal
Allowing for the 90-day total investment horizon Ecopetrol SA ADR is expected to under-perform the Invesco Municipal. In addition to that, Ecopetrol is 3.4 times more volatile than Invesco Municipal Opportunity. It trades about -0.13 of its total potential returns per unit of risk. Invesco Municipal Opportunity is currently generating about 0.08 per unit of volatility. If you would invest 988.00 in Invesco Municipal Opportunity on September 3, 2024 and sell it today you would earn a total of 27.00 from holding Invesco Municipal Opportunity or generate 2.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ecopetrol SA ADR vs. Invesco Municipal Opportunity
Performance |
| Timeline |
| Ecopetrol SA ADR |
| Invesco Municipal |
Ecopetrol and Invesco Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and Invesco Municipal
The main advantage of trading using opposite Ecopetrol and Invesco Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, Invesco Municipal 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 Invesco Municipal will offset losses from the drop in Invesco Municipal's long position.| Ecopetrol vs. Petroleo Brasileiro Petrobras | Ecopetrol vs. Equinor ASA ADR | Ecopetrol vs. Eni SpA ADR | Ecopetrol vs. Cenovus Energy |
| Invesco Municipal vs. Invesco Quality Municipal | Invesco Municipal vs. Invesco Advantage MIT | Invesco Municipal vs. Invesco Municipal Trust | Invesco Municipal vs. Invesco California Value |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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