Correlation Between Ecopetrol and LendingClub
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and LendingClub 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 LendingClub into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecopetrol SA and LendingClub, you can compare the effects of market volatilities on Ecopetrol and LendingClub 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 LendingClub. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and LendingClub.
Diversification Opportunities for Ecopetrol and LendingClub
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Ecopetrol and LendingClub is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA and LendingClub in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LendingClub 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 LendingClub. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LendingClub has no effect on the direction of Ecopetrol i.e., Ecopetrol and LendingClub go up and down completely randomly.
Pair Corralation between Ecopetrol and LendingClub
Assuming the 90 days trading horizon Ecopetrol is expected to generate 2.04 times less return on investment than LendingClub. But when comparing it to its historical volatility, Ecopetrol SA is 1.51 times less risky than LendingClub. It trades about 0.16 of its potential returns per unit of risk. LendingClub is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 1,285 in LendingClub on September 5, 2024 and sell it today you would earn a total of 209.00 from holding LendingClub or generate 16.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Ecopetrol SA vs. LendingClub
Performance |
| Timeline |
| Ecopetrol SA |
| LendingClub |
Ecopetrol and LendingClub Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and LendingClub
The main advantage of trading using opposite Ecopetrol and LendingClub positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, LendingClub 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 LendingClub will offset losses from the drop in LendingClub's long position.| Ecopetrol vs. MGIC INVESTMENT | Ecopetrol vs. Luckin Coffee | Ecopetrol vs. HK Electric Investments | Ecopetrol vs. PennyMac Mortgage Investment |
| LendingClub vs. Visa Inc | LendingClub vs. Visa Inc | LendingClub vs. American Express | LendingClub vs. ORIX Corporation |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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