Correlation Between Ecopetrol and Sinopec Oilfield
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and Sinopec Oilfield 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 Sinopec Oilfield 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 Sinopec Oilfield Service, you can compare the effects of market volatilities on Ecopetrol and Sinopec Oilfield 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 Sinopec Oilfield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and Sinopec Oilfield.
Diversification Opportunities for Ecopetrol and Sinopec Oilfield
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ecopetrol and Sinopec is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and Sinopec Oilfield Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinopec Oilfield Service 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 Sinopec Oilfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinopec Oilfield Service has no effect on the direction of Ecopetrol i.e., Ecopetrol and Sinopec Oilfield go up and down completely randomly.
Pair Corralation between Ecopetrol and Sinopec Oilfield
Allowing for the 90-day total investment horizon Ecopetrol is expected to generate 2.3 times less return on investment than Sinopec Oilfield. But when comparing it to its historical volatility, Ecopetrol SA ADR is 3.07 times less risky than Sinopec Oilfield. It trades about 0.03 of its potential returns per unit of risk. Sinopec Oilfield Service is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 6.81 in Sinopec Oilfield Service on September 4, 2024 and sell it today you would lose (0.27) from holding Sinopec Oilfield Service or give up 3.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Ecopetrol SA ADR vs. Sinopec Oilfield Service
Performance |
| Timeline |
| Ecopetrol SA ADR |
| Sinopec Oilfield Service |
Ecopetrol and Sinopec Oilfield Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and Sinopec Oilfield
The main advantage of trading using opposite Ecopetrol and Sinopec Oilfield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, Sinopec Oilfield 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 Sinopec Oilfield will offset losses from the drop in Sinopec Oilfield's long position.| Ecopetrol vs. Petroleo Brasileiro Petrobras | Ecopetrol vs. Equinor ASA ADR | Ecopetrol vs. Eni SpA ADR | Ecopetrol vs. Cenovus Energy |
| Sinopec Oilfield vs. Apple Inc | Sinopec Oilfield vs. Microsoft | Sinopec Oilfield vs. Amazon Inc | Sinopec Oilfield vs. Alphabet Inc Class C |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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