Correlation Between METHODE ELECTRONICS and Ecopetrol
Can any of the company-specific risk be diversified away by investing in both METHODE ELECTRONICS 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 METHODE ELECTRONICS and Ecopetrol into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between METHODE ELECTRONICS and Ecopetrol SA, you can compare the effects of market volatilities on METHODE ELECTRONICS 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 METHODE ELECTRONICS with a short position of Ecopetrol. Check out your portfolio center. Please also check ongoing floating volatility patterns of METHODE ELECTRONICS and Ecopetrol.
Diversification Opportunities for METHODE ELECTRONICS and Ecopetrol
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between METHODE and Ecopetrol is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding METHODE ELECTRONICS and Ecopetrol SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecopetrol SA and METHODE ELECTRONICS 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 METHODE ELECTRONICS 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 has no effect on the direction of METHODE ELECTRONICS i.e., METHODE ELECTRONICS and Ecopetrol go up and down completely randomly.
Pair Corralation between METHODE ELECTRONICS and Ecopetrol
Assuming the 90 days trading horizon METHODE ELECTRONICS is expected to under-perform the Ecopetrol. In addition to that, METHODE ELECTRONICS is 1.88 times more volatile than Ecopetrol SA. It trades about -0.05 of its total potential returns per unit of risk. Ecopetrol SA is currently generating about 0.03 per unit of volatility. If you would invest 647.00 in Ecopetrol SA on August 29, 2024 and sell it today you would earn a total of 113.00 from holding Ecopetrol SA or generate 17.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
METHODE ELECTRONICS vs. Ecopetrol SA
Performance |
| Timeline |
| METHODE ELECTRONICS |
| Ecopetrol SA |
METHODE ELECTRONICS and Ecopetrol Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with METHODE ELECTRONICS and Ecopetrol
The main advantage of trading using opposite METHODE ELECTRONICS and Ecopetrol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if METHODE ELECTRONICS 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.| METHODE ELECTRONICS vs. Apple Inc | METHODE ELECTRONICS vs. Apple Inc | METHODE ELECTRONICS vs. Microsoft | METHODE ELECTRONICS vs. Microsoft |
| Ecopetrol vs. Superior Plus Corp | Ecopetrol vs. Origin Agritech | Ecopetrol vs. Identiv | Ecopetrol vs. INTUITIVE SURGICAL |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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