Correlation Between Ecopetrol and Peabody Energy

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

Diversification Opportunities for Ecopetrol and Peabody Energy

-0.72

Correlation Coefficient

Ecopetrol  Peabody Energy

Pay attention - limited upside

The 3 months correlation between Ecopetrol and Peabody is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and Peabody Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peabody Energy 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 Peabody Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peabody Energy Corp has no effect on the direction of Ecopetrol i.e., Ecopetrol and Peabody Energy go up and down completely randomly.

Pair Corralation between Ecopetrol and Peabody Energy

Allowing for the 90-day total investment horizon Ecopetrol SA ADR is expected to generate 0.88 times more return on investment than Peabody Energy. However, Ecopetrol SA ADR is 1.13 times less risky than Peabody Energy. It trades about 0.31 of its potential returns per unit of risk. Peabody Energy Corp is currently generating about -0.25 per unit of risk. If you would invest  856.00  in Ecopetrol SA ADR on November 28, 2024 and sell it today you would earn a total of  183.00  from holding Ecopetrol SA ADR or generate 21.38% return on investment over 90 days.

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

Ecopetrol SA ADR  vs.  Peabody Energy Corp

Ecopetrol SA ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ecopetrol SA ADR are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Ecopetrol exhibited solid returns over the last few months and may actually be approaching a breakup point.

Peabody Energy Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Peabody Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Ecopetrol and Peabody Energy

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

The idea behind Ecopetrol SA ADR and Peabody Energy 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.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.