Correlation Between Ecopetrol and Amarantus Bioscience

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

Diversification Opportunities for Ecopetrol and Amarantus Bioscience

0.26

Correlation Coefficient

Ecopetrol  Amarantus Bioscience

Modest diversification

The 3 months correlation between Ecopetrol and Amarantus is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and Amarantus Bioscience Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amarantus Bioscience 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 Amarantus Bioscience. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amarantus Bioscience has no effect on the direction of Ecopetrol i.e., Ecopetrol and Amarantus Bioscience go up and down completely randomly.

Pair Corralation between Ecopetrol and Amarantus Bioscience

Allowing for the 90-day total investment horizon Ecopetrol SA ADR is expected to generate 0.1 times more return on investment than Amarantus Bioscience. However, Ecopetrol SA ADR is 10.33 times less risky than Amarantus Bioscience. It trades about 0.11 of its potential returns per unit of risk. Amarantus Bioscience Holdings is currently generating about -0.21 per unit of risk. If you would invest  790.00  in Ecopetrol SA ADR on October 5, 2024 and sell it today you would earn a total of  36.00  from holding Ecopetrol SA ADR or generate 4.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Ecopetrol SA ADR  vs.  Amarantus Bioscience Holdings

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 latest weak performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Amarantus Bioscience

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amarantus Bioscience Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental drivers, Amarantus Bioscience unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ecopetrol and Amarantus Bioscience

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

The idea behind Ecopetrol SA ADR and Amarantus Bioscience Holdings 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.