Correlation Between Microsoft and Ecopetrol
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and Ecopetrol into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Ecopetrol SA, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of Ecopetrol. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Ecopetrol.
Diversification Opportunities for Microsoft and Ecopetrol
Excellent diversification
The 3 months correlation between Microsoft and Ecopetrol is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Ecopetrol SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecopetrol SA and Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and Ecopetrol go up and down completely randomly.
Pair Corralation between Microsoft and Ecopetrol
Assuming the 90 days trading horizon Microsoft is expected to generate 90.83 times less return on investment than Ecopetrol. But when comparing it to its historical volatility, Microsoft is 1.12 times less risky than Ecopetrol. It trades about 0.0 of its potential returns per unit of risk. Ecopetrol SA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 718.00 in Ecopetrol SA on August 31, 2024 and sell it today you would earn a total of 30.00 from holding Ecopetrol SA or generate 4.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Ecopetrol SA
Performance |
| Timeline |
| Microsoft |
| Ecopetrol SA |
Microsoft and Ecopetrol Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Ecopetrol
The main advantage of trading using opposite Microsoft and Ecopetrol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. Geely Automobile Holdings | Microsoft vs. CarsalesCom | Microsoft vs. INTER CARS SA | Microsoft vs. Motorcar Parts of |
| Ecopetrol vs. Data3 Limited | Ecopetrol vs. National Storage Affiliates | Ecopetrol vs. Cars Inc | Ecopetrol vs. Grupo Carso SAB |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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