Correlation Between Ecopetrol and Enterprise

Can any of the company-specific risk be diversified away by investing in both Ecopetrol and Enterprise 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 Enterprise 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 Enterprise 40 Technology, you can compare the effects of market volatilities on Ecopetrol and Enterprise 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 Enterprise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and Enterprise.

Diversification Opportunities for Ecopetrol and Enterprise

-0.74

Correlation Coefficient

Ecopetrol  Enterprise

Pay attention - limited upside

The 3 months correlation between Ecopetrol and Enterprise is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and Enterprise 40 Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enterprise 40 Technology 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 Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enterprise 40 Technology has no effect on the direction of Ecopetrol i.e., Ecopetrol and Enterprise go up and down completely randomly.

Pair Corralation between Ecopetrol and Enterprise

Allowing for the 90-day total investment horizon Ecopetrol SA ADR is expected to generate 14.69 times more return on investment than Enterprise. However, Ecopetrol is 14.69 times more volatile than Enterprise 40 Technology. It trades about 0.03 of its potential returns per unit of risk. Enterprise 40 Technology is currently generating about 0.19 per unit of risk. If you would invest  636.00  in Ecopetrol SA ADR on September 4, 2024 and sell it today you would earn a total of  161.00  from holding Ecopetrol SA ADR or generate 25.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	30.51%
Values	Daily Returns

Ecopetrol SA ADR  vs.  Enterprise 40 Technology

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 weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Enterprise 40 Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enterprise 40 Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Enterprise 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 Enterprise

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

The idea behind Ecopetrol SA ADR and Enterprise 40 Technology 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.