Correlation Between Isabella Bank and Ecopetrol

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Isabella Bank 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 Isabella Bank and Ecopetrol into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Isabella Bank and Ecopetrol SA ADR, you can compare the effects of market volatilities on Isabella Bank 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 Isabella Bank with a short position of Ecopetrol. Check out your portfolio center. Please also check ongoing floating volatility patterns of Isabella Bank and Ecopetrol.

Diversification Opportunities for Isabella Bank and Ecopetrol

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between Isabella and Ecopetrol is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Isabella Bank 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 Isabella Bank 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 Isabella Bank 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 Isabella Bank i.e., Isabella Bank and Ecopetrol go up and down completely randomly.

Pair Corralation between Isabella Bank and Ecopetrol

Given the investment horizon of 90 days Isabella Bank is expected to under-perform the Ecopetrol. In addition to that, Isabella Bank is 1.01 times more volatile than Ecopetrol SA ADR. It trades about -0.27 of its total potential returns per unit of risk. Ecopetrol SA ADR is currently generating about -0.19 per unit of volatility. If you would invest  1,162  in Ecopetrol SA ADR on December 19, 2023 and sell it today you would lose (82.00) from holding Ecopetrol SA ADR or give up 7.06% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.24%
ValuesDaily Returns

Isabella Bank  vs.  Ecopetrol SA ADR

 Performance 
       Timeline  
Isabella Bank 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Isabella Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
Ecopetrol SA ADR 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Ecopetrol SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Isabella Bank and Ecopetrol Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Isabella Bank and Ecopetrol

The main advantage of trading using opposite Isabella Bank and Ecopetrol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Isabella Bank 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.
The idea behind Isabella Bank and Ecopetrol SA ADR 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.
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..

Other Complementary Tools

Risk-Return Analysis
View associations between returns expected from investment and the risk you assume
Stock Screener
Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook.
Idea Breakdown
Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes
Correlation Analysis
Reduce portfolio risk simply by holding instruments which are not perfectly correlated
Global Markets Map
Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes
Portfolio Diagnostics
Use generated alerts and portfolio events aggregator to diagnose current holdings
FinTech Suite
Use AI to screen and filter profitable investment opportunities
Insider Screener
Find insiders across different sectors to evaluate their impact on performance
CEOs Directory
Screen CEOs from public companies around the world
Theme Ratings
Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance
Companies Directory
Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals
Investing Opportunities
Build portfolios using our predefined set of ideas and optimize them against your investing preferences
Money Flow Index
Determine momentum by analyzing Money Flow Index and other technical indicators