Correlation Between Ecopetrol and Ulta Beauty
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and Ulta Beauty 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 Ulta Beauty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecopetrol SA and Ulta Beauty, you can compare the effects of market volatilities on Ecopetrol and Ulta Beauty 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 Ulta Beauty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and Ulta Beauty.
Diversification Opportunities for Ecopetrol and Ulta Beauty
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ecopetrol and Ulta is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA and Ulta Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ulta Beauty 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 Ulta Beauty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ulta Beauty has no effect on the direction of Ecopetrol i.e., Ecopetrol and Ulta Beauty go up and down completely randomly.
Pair Corralation between Ecopetrol and Ulta Beauty
Assuming the 90 days trading horizon Ecopetrol SA is expected to generate 0.95 times more return on investment than Ulta Beauty. However, Ecopetrol SA is 1.05 times less risky than Ulta Beauty. It trades about 0.17 of its potential returns per unit of risk. Ulta Beauty is currently generating about 0.13 per unit of risk. If you would invest 696.00 in Ecopetrol SA on September 1, 2024 and sell it today you would earn a total of 54.00 from holding Ecopetrol SA or generate 7.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Ecopetrol SA vs. Ulta Beauty
Performance |
| Timeline |
| Ecopetrol SA |
| Ulta Beauty |
Ecopetrol and Ulta Beauty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and Ulta Beauty
The main advantage of trading using opposite Ecopetrol and Ulta Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, Ulta Beauty 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 Ulta Beauty will offset losses from the drop in Ulta Beauty's long position.The idea behind Ecopetrol SA and Ulta Beauty pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Ulta Beauty vs. MercadoLibre | Ulta Beauty vs. AutoZone | Ulta Beauty vs. Superior Plus Corp | Ulta Beauty vs. NMI Holdings |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
Other Complementary Tools
| CEOs Directory Screen CEOs from public companies around the world | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. |