Correlation Between Ecopetrol and Star8 Corp

Can any of the company-specific risk be diversified away by investing in both Ecopetrol and Star8 Corp 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 Star8 Corp 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 Star8 Corp, you can compare the effects of market volatilities on Ecopetrol and Star8 Corp 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 Star8 Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and Star8 Corp.

Diversification Opportunities for Ecopetrol and Star8 Corp

-0.48

Correlation Coefficient

Ecopetrol  Star8 Corp

Very good diversification

The 3 months correlation between Ecopetrol and Star8 is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and Star8 Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Star8 Corp 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 Star8 Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Star8 Corp has no effect on the direction of Ecopetrol i.e., Ecopetrol and Star8 Corp go up and down completely randomly.

Pair Corralation between Ecopetrol and Star8 Corp

Allowing for the 90-day total investment horizon Ecopetrol SA ADR is expected to generate 0.25 times more return on investment than Star8 Corp. However, Ecopetrol SA ADR is 4.01 times less risky than Star8 Corp. It trades about 0.05 of its potential returns per unit of risk. Star8 Corp is currently generating about 0.01 per unit of risk. If you would invest  788.00  in Ecopetrol SA ADR on May 5, 2025 and sell it today you would earn a total of  41.00  from holding Ecopetrol SA ADR or generate 5.2% return on investment over 90 days.

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

Ecopetrol SA ADR  vs.  Star8 Corp

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 4 (%) 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.

Star8 Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Star8 Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Star8 Corp is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Ecopetrol and Star8 Corp

The main advantage of trading using opposite Ecopetrol and Star8 Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, Star8 Corp 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 Star8 Corp will offset losses from the drop in Star8 Corp's long position.

The idea behind Ecopetrol SA ADR and Star8 Corp 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.