Correlation Between Ecopetrol and Amundi SA

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

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

Diversification Opportunities for Ecopetrol and Amundi SA

-0.05

Correlation Coefficient

Ecopetrol  Amundi SA

Good diversification

The 3 months correlation between Ecopetrol and Amundi is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and Amundi SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amundi SA and Ecopetrol 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 Ecopetrol SA ADR are associated (or correlated) with Amundi SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amundi SA has no effect on the direction of Ecopetrol i.e., Ecopetrol and Amundi SA go up and down completely randomly.

Pair Corralation between Ecopetrol and Amundi SA

Allowing for the 90-day total investment horizon Ecopetrol SA ADR is expected to under-perform the Amundi SA. But the stock apears to be less risky and, when comparing its historical volatility, Ecopetrol SA ADR is 1.22 times less risky than Amundi SA. The stock trades about -0.01 of its potential returns per unit of risk. The Amundi SA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  5,080  in Amundi SA on September 4, 2024 and sell it today you would earn a total of  1,410  from holding Amundi SA or generate 27.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.68%
Values	Daily Returns

Ecopetrol SA ADR  vs.  Amundi SA

Ecopetrol SA ADR

Risk-Adjusted Performance

0 of 100

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 weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Amundi SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amundi SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Amundi SA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ecopetrol and Amundi SA

The main advantage of trading using opposite Ecopetrol and Amundi SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, Amundi SA 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 Amundi SA will offset losses from the drop in Amundi SA's long position.

The idea behind Ecopetrol SA ADR and Amundi SA 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.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.