Correlation Between Uber Technologies and Ecopetrol

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

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

Diversification Opportunities for Uber Technologies and Ecopetrol

-0.46

Correlation Coefficient

Uber Technologies  Ecopetrol

Very good diversification

The 3 months correlation between Uber and Ecopetrol is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Uber Technologies 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 Uber Technologies 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 Uber Technologies 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 Uber Technologies i.e., Uber Technologies and Ecopetrol go up and down completely randomly.

Pair Corralation between Uber Technologies and Ecopetrol

Given the investment horizon of 90 days Uber Technologies is expected to under-perform the Ecopetrol. In addition to that, Uber Technologies is 1.08 times more volatile than Ecopetrol SA ADR. It trades about -0.26 of its total potential returns per unit of risk. Ecopetrol SA ADR is currently generating about 0.13 per unit of volatility. If you would invest  1,136  in Ecopetrol SA ADR on January 30, 2024 and sell it today you would earn a total of  49.00  from holding Ecopetrol SA ADR or generate 4.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Uber Technologies  vs.  Ecopetrol SA ADR

Uber Technologies

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Uber Technologies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Uber Technologies is not utilizing all of its potentials. The recent 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 Uber Technologies and Ecopetrol

The main advantage of trading using opposite Uber Technologies and Ecopetrol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Uber Technologies 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 Uber Technologies 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.