Correlation Between Ecopetrol and Omega Healthcare
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and Omega Healthcare 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 Omega Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecopetrol SA and Omega Healthcare Investors, you can compare the effects of market volatilities on Ecopetrol and Omega Healthcare 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 Omega Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and Omega Healthcare.
Diversification Opportunities for Ecopetrol and Omega Healthcare
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ecopetrol and Omega is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA and Omega Healthcare Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Omega Healthcare Inv 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 Omega Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Omega Healthcare Inv has no effect on the direction of Ecopetrol i.e., Ecopetrol and Omega Healthcare go up and down completely randomly.
Pair Corralation between Ecopetrol and Omega Healthcare
Assuming the 90 days trading horizon Ecopetrol SA is expected to generate 1.68 times more return on investment than Omega Healthcare. However, Ecopetrol is 1.68 times more volatile than Omega Healthcare Investors. It trades about 0.19 of its potential returns per unit of risk. Omega Healthcare Investors is currently generating about -0.13 per unit of risk. If you would invest 746.00 in Ecopetrol SA on November 3, 2024 and sell it today you would earn a total of 156.00 from holding Ecopetrol SA or generate 20.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.5% |
| Values | Daily Returns |
Ecopetrol SA vs. Omega Healthcare Investors
Performance |
| Timeline |
| Ecopetrol SA |
| Omega Healthcare Inv |
Ecopetrol and Omega Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and Omega Healthcare
The main advantage of trading using opposite Ecopetrol and Omega Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, Omega Healthcare 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 Omega Healthcare will offset losses from the drop in Omega Healthcare's long position.| Ecopetrol vs. SERI INDUSTRIAL EO | Ecopetrol vs. Calibre Mining Corp | Ecopetrol vs. Alaska Air Group | Ecopetrol vs. GRIFFIN MINING LTD |
| Omega Healthcare vs. Aya Gold Silver | Omega Healthcare vs. Tencent Music Entertainment | Omega Healthcare vs. Nexstar Media Group | Omega Healthcare vs. Urban Outfitters |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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