Correlation Between Ecopetrol and Bank Of Georgia

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

Diversification Opportunities for Ecopetrol and Bank Of Georgia

-0.83

Correlation Coefficient

Ecopetrol  Bank Of Georgia

Pay attention - limited upside

The 3 months correlation between Ecopetrol and Bank is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and Bank Of Georgia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Of Georgia 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 Bank Of Georgia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Of Georgia has no effect on the direction of Ecopetrol i.e., Ecopetrol and Bank Of Georgia go up and down completely randomly.

Pair Corralation between Ecopetrol and Bank Of Georgia

Allowing for the 90-day total investment horizon Ecopetrol is expected to generate 18.96 times less return on investment than Bank Of Georgia. But when comparing it to its historical volatility, Ecopetrol SA ADR is 2.57 times less risky than Bank Of Georgia. It trades about 0.01 of its potential returns per unit of risk. Bank Of Georgia is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,915  in Bank Of Georgia on October 3, 2024 and sell it today you would earn a total of  1,485  from holding Bank Of Georgia or generate 37.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	20.92%
Values	Daily Returns

Ecopetrol SA ADR  vs.  Bank Of Georgia

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.

Bank Of Georgia

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ecopetrol and Bank Of Georgia

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

The idea behind Ecopetrol SA ADR and Bank Of Georgia 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.