Correlation Between Ecopetrol and St James’s
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and St James’s 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 St James’s into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecopetrol SA and St Jamess Place, you can compare the effects of market volatilities on Ecopetrol and St James’s 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 St James’s. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and St James’s.
Diversification Opportunities for Ecopetrol and St James’s
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ecopetrol and 1IV is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA and St Jamess Place in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on St Jamess Place 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 are associated (or correlated) with St James’s. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of St Jamess Place has no effect on the direction of Ecopetrol i.e., Ecopetrol and St James’s go up and down completely randomly.
Pair Corralation between Ecopetrol and St James’s
Assuming the 90 days trading horizon Ecopetrol SA is expected to under-perform the St James’s. But the stock apears to be less risky and, when comparing its historical volatility, Ecopetrol SA is 1.23 times less risky than St James’s. The stock trades about -0.02 of its potential returns per unit of risk. The St Jamess Place is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 759.00 in St Jamess Place on September 14, 2024 and sell it today you would earn a total of 314.00 from holding St Jamess Place or generate 41.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.64% |
| Values | Daily Returns |
Ecopetrol SA vs. St Jamess Place
Performance |
| Timeline |
| Ecopetrol SA |
| St Jamess Place |
Ecopetrol and St James’s Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and St James’s
The main advantage of trading using opposite Ecopetrol and St James’s positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, St James’s 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 St James’s will offset losses from the drop in St James’s' long position.| Ecopetrol vs. Exxon Mobil | Ecopetrol vs. TotalEnergies SE | Ecopetrol vs. BP plc | Ecopetrol vs. Superior Plus Corp |
| St James’s vs. PROSIEBENSAT1 MEDIADR4 | St James’s vs. X FAB Silicon Foundries | St James’s vs. PARKEN Sport Entertainment | St James’s vs. Nissan Chemical Corp |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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