Correlation Between Ecopetrol and CSB Bancorp

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

Diversification Opportunities for Ecopetrol and CSB Bancorp

0.7

Correlation Coefficient

Ecopetrol  CSB Bancorp

Poor diversification

The 3 months correlation between Ecopetrol and CSB is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and CSB Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSB Bancorp 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 CSB Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSB Bancorp has no effect on the direction of Ecopetrol i.e., Ecopetrol and CSB Bancorp go up and down completely randomly.

Pair Corralation between Ecopetrol and CSB Bancorp

Allowing for the 90-day total investment horizon Ecopetrol is expected to generate 1.81 times less return on investment than CSB Bancorp. In addition to that, Ecopetrol is 2.32 times more volatile than CSB Bancorp. It trades about 0.04 of its total potential returns per unit of risk. CSB Bancorp is currently generating about 0.16 per unit of volatility. If you would invest  4,092  in CSB Bancorp on April 29, 2025 and sell it today you would earn a total of  316.00  from holding CSB Bancorp or generate 7.72% return on investment over 90 days.

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

Ecopetrol SA ADR  vs.  CSB Bancorp

Ecopetrol SA ADR

Risk-Adjusted Performance

Insignificant

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.

CSB Bancorp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CSB Bancorp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent fundamental drivers, CSB Bancorp may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Ecopetrol and CSB Bancorp

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

The idea behind Ecopetrol SA ADR and CSB Bancorp 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.