Correlation Between Ecopetrol and Yanzhou Coal
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and Yanzhou Coal 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 Yanzhou Coal 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 Yanzhou Coal Mining, you can compare the effects of market volatilities on Ecopetrol and Yanzhou Coal 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 Yanzhou Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and Yanzhou Coal.
Diversification Opportunities for Ecopetrol and Yanzhou Coal
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ecopetrol and Yanzhou is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and Yanzhou Coal Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yanzhou Coal Mining 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 Yanzhou Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yanzhou Coal Mining has no effect on the direction of Ecopetrol i.e., Ecopetrol and Yanzhou Coal go up and down completely randomly.
Pair Corralation between Ecopetrol and Yanzhou Coal
Allowing for the 90-day total investment horizon Ecopetrol SA ADR is expected to generate 12.64 times more return on investment than Yanzhou Coal. However, Ecopetrol is 12.64 times more volatile than Yanzhou Coal Mining. It trades about 0.08 of its potential returns per unit of risk. Yanzhou Coal Mining is currently generating about -0.21 per unit of risk. If you would invest 781.00 in Ecopetrol SA ADR on August 31, 2024 and sell it today you would earn a total of 23.00 from holding Ecopetrol SA ADR or generate 2.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ecopetrol SA ADR vs. Yanzhou Coal Mining
Performance |
| Timeline |
| Ecopetrol SA ADR |
| Yanzhou Coal Mining |
Ecopetrol and Yanzhou Coal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and Yanzhou Coal
The main advantage of trading using opposite Ecopetrol and Yanzhou Coal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, Yanzhou Coal 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 Yanzhou Coal will offset losses from the drop in Yanzhou Coal's long position.| Ecopetrol vs. Petroleo Brasileiro Petrobras | Ecopetrol vs. Equinor ASA ADR | Ecopetrol vs. Eni SpA ADR | Ecopetrol vs. Cenovus Energy |
| Yanzhou Coal vs. Indo Tambangraya Megah | Yanzhou Coal vs. Adaro Energy Tbk | Yanzhou Coal vs. Thungela Resources Limited | Yanzhou Coal vs. China Coal Energy |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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