Correlation Between Galp Energa and Ecopetrol
Can any of the company-specific risk be diversified away by investing in both Galp Energa and Ecopetrol 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 Galp Energa and Ecopetrol into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Galp Energa and Ecopetrol SA ADR, you can compare the effects of market volatilities on Galp Energa and Ecopetrol 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 Galp Energa with a short position of Ecopetrol. Check out your portfolio center. Please also check ongoing floating volatility patterns of Galp Energa and Ecopetrol.
Diversification Opportunities for Galp Energa and Ecopetrol
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Galp and Ecopetrol is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Galp Energa and Ecopetrol SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecopetrol SA ADR and Galp Energa 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 Galp Energa are associated (or correlated) with Ecopetrol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecopetrol SA ADR has no effect on the direction of Galp Energa i.e., Galp Energa and Ecopetrol go up and down completely randomly.
Pair Corralation between Galp Energa and Ecopetrol
Assuming the 90 days horizon Galp Energa is expected to under-perform the Ecopetrol. But the pink sheet apears to be less risky and, when comparing its historical volatility, Galp Energa is 1.49 times less risky than Ecopetrol. The pink sheet trades about -0.08 of its potential returns per unit of risk. The Ecopetrol SA ADR is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 805.00 in Ecopetrol SA ADR on August 27, 2024 and sell it today you would earn a total of 5.00 from holding Ecopetrol SA ADR or generate 0.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Galp Energa vs. Ecopetrol SA ADR
Performance |
| Timeline |
| Galp Energa |
| Ecopetrol SA ADR |
Galp Energa and Ecopetrol Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Galp Energa and Ecopetrol
The main advantage of trading using opposite Galp Energa and Ecopetrol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Galp Energa position performs unexpectedly, Ecopetrol 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 Ecopetrol will offset losses from the drop in Ecopetrol's long position.| Galp Energa vs. Shell PLC ADR | Galp Energa vs. Equinor ASA ADR | Galp Energa vs. BP PLC ADR | Galp Energa vs. Eni SpA ADR |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments |