Correlation Between Canadian Overseas and Ecopetrol
Can any of the company-specific risk be diversified away by investing in both Canadian Overseas 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 Canadian Overseas and Ecopetrol into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canadian Overseas Petroleum and Ecopetrol SA ADR, you can compare the effects of market volatilities on Canadian Overseas 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 Canadian Overseas with a short position of Ecopetrol. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Overseas and Ecopetrol.
Diversification Opportunities for Canadian Overseas and Ecopetrol
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Canadian and Ecopetrol is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Overseas Petroleum 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 Canadian Overseas 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 Canadian Overseas Petroleum 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 Canadian Overseas i.e., Canadian Overseas and Ecopetrol go up and down completely randomly.
Pair Corralation between Canadian Overseas and Ecopetrol
Assuming the 90 days horizon Canadian Overseas Petroleum is expected to generate 11.04 times more return on investment than Ecopetrol. However, Canadian Overseas is 11.04 times more volatile than Ecopetrol SA ADR. It trades about 0.04 of its potential returns per unit of risk. Ecopetrol SA ADR is currently generating about 0.01 per unit of risk. If you would invest 26.00 in Canadian Overseas Petroleum on January 24, 2024 and sell it today you would lose (25.80) from holding Canadian Overseas Petroleum or give up 99.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Overseas Petroleum vs. Ecopetrol SA ADR
Performance |
| Timeline |
| Canadian Overseas |
| Ecopetrol SA ADR |
Canadian Overseas and Ecopetrol Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Overseas and Ecopetrol
The main advantage of trading using opposite Canadian Overseas and Ecopetrol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Overseas 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.| Canadian Overseas vs. Indo Tambangraya Megah | Canadian Overseas vs. Bukit Asam Tbk | Canadian Overseas vs. Geo Energy Resources | Canadian Overseas vs. Yancoal Australia |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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