Correlation Between HYDROFARM HLD and Ecopetrol

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

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

Diversification Opportunities for HYDROFARM HLD and Ecopetrol

0.19

Correlation Coefficient

HYDROFARM HLD  Ecopetrol

Average diversification

The 3 months correlation between HYDROFARM and Ecopetrol is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding HYDROFARM HLD GRP and Ecopetrol SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecopetrol SA and HYDROFARM HLD 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 HYDROFARM HLD GRP 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 has no effect on the direction of HYDROFARM HLD i.e., HYDROFARM HLD and Ecopetrol go up and down completely randomly.

Pair Corralation between HYDROFARM HLD and Ecopetrol

Assuming the 90 days trading horizon HYDROFARM HLD GRP is expected to under-perform the Ecopetrol. In addition to that, HYDROFARM HLD is 2.33 times more volatile than Ecopetrol SA. It trades about -0.02 of its total potential returns per unit of risk. Ecopetrol SA is currently generating about 0.02 per unit of volatility. If you would invest  733.00  in Ecopetrol SA on October 25, 2024 and sell it today you would earn a total of  71.00  from holding Ecopetrol SA or generate 9.69% return on investment over 90 days.

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

HYDROFARM HLD GRP  vs.  Ecopetrol SA

HYDROFARM HLD GRP

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ecopetrol SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ecopetrol SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical indicators, Ecopetrol may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with HYDROFARM HLD and Ecopetrol

The main advantage of trading using opposite HYDROFARM HLD and Ecopetrol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HYDROFARM HLD 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 HYDROFARM HLD GRP and Ecopetrol 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.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.