Correlation Between Ecopetrol and Ebang International

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

Diversification Opportunities for Ecopetrol and Ebang International

-0.65

Correlation Coefficient

Ecopetrol  Ebang International

Excellent diversification

The 3 months correlation between Ecopetrol and Ebang is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and Ebang International Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ebang International 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 Ebang International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ebang International has no effect on the direction of Ecopetrol i.e., Ecopetrol and Ebang International go up and down completely randomly.

Pair Corralation between Ecopetrol and Ebang International

Allowing for the 90-day total investment horizon Ecopetrol SA ADR is expected to generate 0.79 times more return on investment than Ebang International. However, Ecopetrol SA ADR is 1.27 times less risky than Ebang International. It trades about 0.1 of its potential returns per unit of risk. Ebang International Holdings is currently generating about -0.26 per unit of risk. If you would invest  830.00  in Ecopetrol SA ADR on December 5, 2024 and sell it today you would earn a total of  81.00  from holding Ecopetrol SA ADR or generate 9.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.5%
Values	Daily Returns

Ecopetrol SA ADR  vs.  Ebang International Holdings

Ecopetrol SA ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ecopetrol SA ADR are ranked lower than 7 (%) 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.

Ebang International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ebang International Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Ecopetrol and Ebang International

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

The idea behind Ecopetrol SA ADR and Ebang International 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.