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
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Ecopetrol and LendingClub is -0.73. 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 SA is expected to under-perform the LendingClub. But the stock apears to be less risky and, when comparing its historical volatility, Ecopetrol SA is 1.66 times less risky than LendingClub. The stock trades about -0.1 of its potential returns per unit of risk. The LendingClub is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 1,046 in LendingClub on September 5, 2024 and sell it today you would earn a total of 448.00 from holding LendingClub or generate 42.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| 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. ADRIATIC METALS LS 013355 | Ecopetrol vs. JSC Halyk bank | Ecopetrol vs. QBE Insurance Group | Ecopetrol vs. PT Bank Maybank |
| 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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