Correlation Between Ecopetrol and International Consolidated
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and International Consolidated 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 International Consolidated into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecopetrol SA and International Consolidated Airlines, you can compare the effects of market volatilities on Ecopetrol and International Consolidated 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 International Consolidated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and International Consolidated.
Diversification Opportunities for Ecopetrol and International Consolidated
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ecopetrol and International is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA and International Consolidated Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Consolidated 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 International Consolidated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Consolidated has no effect on the direction of Ecopetrol i.e., Ecopetrol and International Consolidated go up and down completely randomly.
Pair Corralation between Ecopetrol and International Consolidated
Assuming the 90 days trading horizon Ecopetrol is expected to generate 4.28 times less return on investment than International Consolidated. But when comparing it to its historical volatility, Ecopetrol SA is 1.1 times less risky than International Consolidated. It trades about 0.1 of its potential returns per unit of risk. International Consolidated Airlines is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 253.00 in International Consolidated Airlines on August 31, 2024 and sell it today you would earn a total of 53.00 from holding International Consolidated Airlines or generate 20.95% 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. International Consolidated Air
Performance |
| Timeline |
| Ecopetrol SA |
| International Consolidated |
Ecopetrol and International Consolidated Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and International Consolidated
The main advantage of trading using opposite Ecopetrol and International Consolidated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, International Consolidated 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 International Consolidated will offset losses from the drop in International Consolidated's long position.| Ecopetrol vs. Data3 Limited | Ecopetrol vs. National Storage Affiliates | Ecopetrol vs. Cars Inc | Ecopetrol vs. Grupo Carso SAB |
| International Consolidated vs. RYANAIR HLDGS ADR | International Consolidated vs. Southwest Airlines Co | International Consolidated vs. Superior Plus Corp | International Consolidated 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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