Correlation Between Ecopetrol and Emera Maine

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

Diversification Opportunities for Ecopetrol and Emera Maine

-0.48

Correlation Coefficient

Ecopetrol  Emera Maine

Very good diversification

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

Pair Corralation between Ecopetrol and Emera Maine

If you would invest  795.00  in Ecopetrol SA ADR on October 15, 2024 and sell it today you would earn a total of  54.00  from holding Ecopetrol SA ADR or generate 6.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	5.56%
Values	Daily Returns

Ecopetrol SA ADR  vs.  Emera Maine PFD

Ecopetrol SA ADR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ecopetrol SA ADR are ranked lower than 1 (%) 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.

Emera Maine PFD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Emera Maine PFD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Emera Maine is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ecopetrol and Emera Maine

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

The idea behind Ecopetrol SA ADR and Emera Maine PFD 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.