Correlation Between Bristol-Myers Squibb and Ecopetrol

Can any of the company-specific risk be diversified away by investing in both Bristol-Myers Squibb 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 Bristol-Myers Squibb and Ecopetrol into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bristol Myers Squibb and Ecopetrol SA ADR, you can compare the effects of market volatilities on Bristol-Myers Squibb 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 Bristol-Myers Squibb with a short position of Ecopetrol. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bristol-Myers Squibb and Ecopetrol.

Diversification Opportunities for Bristol-Myers Squibb and Ecopetrol

0.0

Correlation Coefficient

Bristol-Myers Squibb  Ecopetrol

Pay attention - limited upside

The 3 months correlation between Bristol-Myers and Ecopetrol is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb 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 Bristol-Myers Squibb 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 Bristol Myers Squibb 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 Bristol-Myers Squibb i.e., Bristol-Myers Squibb and Ecopetrol go up and down completely randomly.

Pair Corralation between Bristol-Myers Squibb and Ecopetrol

If you would invest  1,124  in Ecopetrol SA ADR on January 28, 2024 and sell it today you would earn a total of  61.00  from holding Ecopetrol SA ADR or generate 5.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Bristol Myers Squibb  vs.  Ecopetrol SA ADR

Bristol Myers Squibb

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bristol Myers Squibb has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable primary indicators, Bristol-Myers Squibb is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Ecopetrol SA ADR

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ecopetrol SA ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Ecopetrol is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Bristol-Myers Squibb and Ecopetrol

The main advantage of trading using opposite Bristol-Myers Squibb and Ecopetrol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bristol-Myers Squibb 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 Bristol Myers Squibb 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.