Correlation Between Ecopetrol and Apple

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Can any of the company-specific risk be diversified away by investing in both Ecopetrol and Apple 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 Apple into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecopetrol SA and Apple Inc, you can compare the effects of market volatilities on Ecopetrol and Apple 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 Apple. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and Apple.

Diversification Opportunities for Ecopetrol and Apple

-0.52
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Ecopetrol and Apple is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc 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 Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of Ecopetrol i.e., Ecopetrol and Apple go up and down completely randomly.

Pair Corralation between Ecopetrol and Apple

Assuming the 90 days trading horizon Ecopetrol is expected to generate 1.11 times less return on investment than Apple. In addition to that, Ecopetrol is 1.85 times more volatile than Apple Inc. It trades about 0.17 of its total potential returns per unit of risk. Apple Inc is currently generating about 0.36 per unit of volatility. If you would invest  20,575  in Apple Inc on September 1, 2024 and sell it today you would earn a total of  1,860  from holding Apple Inc or generate 9.04% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Ecopetrol SA  vs.  Apple Inc

 Performance 
       Timeline  
Ecopetrol SA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Ecopetrol SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
Apple Inc 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Apple may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Ecopetrol and Apple Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ecopetrol and Apple

The main advantage of trading using opposite Ecopetrol and Apple positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, Apple 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 Apple will offset losses from the drop in Apple's long position.
The idea behind Ecopetrol SA and Apple Inc 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.
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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