Correlation Between NYSE Composite and Ecopetrol
Can any of the company-specific risk be diversified away by investing in both NYSE Composite 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 NYSE Composite and Ecopetrol into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Ecopetrol SA ADR, you can compare the effects of market volatilities on NYSE Composite 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 NYSE Composite with a short position of Ecopetrol. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Ecopetrol.
Diversification Opportunities for NYSE Composite and Ecopetrol
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NYSE and Ecopetrol is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite 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 NYSE Composite 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 NYSE Composite 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 NYSE Composite i.e., NYSE Composite and Ecopetrol go up and down completely randomly.
Pair Corralation between NYSE Composite and Ecopetrol
Assuming the 90 days trading horizon NYSE Composite is expected to under-perform the Ecopetrol. But the index apears to be less risky and, when comparing its historical volatility, NYSE Composite is 2.62 times less risky than Ecopetrol. The index trades about -0.22 of its potential returns per unit of risk. The Ecopetrol SA ADR is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 1,111 in Ecopetrol SA ADR on January 28, 2024 and sell it today you would earn a total of 74.00 from holding Ecopetrol SA ADR or generate 6.66% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
NYSE Composite vs. Ecopetrol SA ADR
Performance |
Timeline |
NYSE Composite and Ecopetrol Volatility Contrast
Predicted Return Density |
Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Ecopetrol SA ADR
Pair trading matchups for Ecopetrol
Pair Trading with NYSE Composite and Ecopetrol
The main advantage of trading using opposite NYSE Composite and Ecopetrol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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.NYSE Composite vs. Cedar Fair LP | NYSE Composite vs. Avarone Metals | NYSE Composite vs. Bm Technologies | NYSE Composite vs. RadNet Inc |
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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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