Correlation Between Ecopetrol and Builders FirstSource

Can any of the company-specific risk be diversified away by investing in both Ecopetrol and Builders FirstSource 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 Builders FirstSource 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 Builders FirstSource, you can compare the effects of market volatilities on Ecopetrol and Builders FirstSource 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 Builders FirstSource. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and Builders FirstSource.

Diversification Opportunities for Ecopetrol and Builders FirstSource

-0.71

Correlation Coefficient

Ecopetrol  Builders FirstSource

Pay attention - limited upside

The 3 months correlation between Ecopetrol and Builders is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and Builders FirstSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Builders FirstSource 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 Builders FirstSource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Builders FirstSource has no effect on the direction of Ecopetrol i.e., Ecopetrol and Builders FirstSource go up and down completely randomly.

Pair Corralation between Ecopetrol and Builders FirstSource

Allowing for the 90-day total investment horizon Ecopetrol SA ADR is expected to generate 0.7 times more return on investment than Builders FirstSource. However, Ecopetrol SA ADR is 1.43 times less risky than Builders FirstSource. It trades about 0.09 of its potential returns per unit of risk. Builders FirstSource is currently generating about -0.15 per unit of risk. If you would invest  913.00  in Ecopetrol SA ADR on September 6, 2025 and sell it today you would earn a total of  93.00  from holding Ecopetrol SA ADR or generate 10.19% return on investment over 90 days.

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

Ecopetrol SA ADR  vs.  Builders FirstSource

Ecopetrol SA ADR

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Ecopetrol SA ADR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Ecopetrol may actually be approaching a critical reversion point that can send shares even higher in January 2026.

Builders FirstSource

Risk-Adjusted Performance

Weakest

Over the last 90 days Builders FirstSource has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in January 2026. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Ecopetrol and Builders FirstSource

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

The idea behind Ecopetrol SA ADR and Builders FirstSource 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.