Correlation Between Ecopetrol and Deutsche Lufthansa
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and Deutsche Lufthansa 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 Deutsche Lufthansa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecopetrol SA and Deutsche Lufthansa AG, you can compare the effects of market volatilities on Ecopetrol and Deutsche Lufthansa 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 Deutsche Lufthansa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and Deutsche Lufthansa.
Diversification Opportunities for Ecopetrol and Deutsche Lufthansa
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ecopetrol and Deutsche is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA and Deutsche Lufthansa AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Lufthansa 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 Deutsche Lufthansa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Lufthansa has no effect on the direction of Ecopetrol i.e., Ecopetrol and Deutsche Lufthansa go up and down completely randomly.
Pair Corralation between Ecopetrol and Deutsche Lufthansa
Assuming the 90 days trading horizon Ecopetrol SA is expected to generate 1.28 times more return on investment than Deutsche Lufthansa. However, Ecopetrol is 1.28 times more volatile than Deutsche Lufthansa AG. It trades about 0.17 of its potential returns per unit of risk. Deutsche Lufthansa AG is currently generating about -0.02 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 | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Ecopetrol SA vs. Deutsche Lufthansa AG
Performance |
| Timeline |
| Ecopetrol SA |
| Deutsche Lufthansa |
Ecopetrol and Deutsche Lufthansa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and Deutsche Lufthansa
The main advantage of trading using opposite Ecopetrol and Deutsche Lufthansa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, Deutsche Lufthansa 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 Deutsche Lufthansa will offset losses from the drop in Deutsche Lufthansa's long position.The idea behind Ecopetrol SA and Deutsche Lufthansa AG 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.| Deutsche Lufthansa vs. EHEALTH | Deutsche Lufthansa vs. TITAN MACHINERY | Deutsche Lufthansa vs. AGRICULTBK HADR25 YC | Deutsche Lufthansa vs. DiamondRock Hospitality |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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