Correlation Between Ecopetrol and EQRx

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

Diversification Opportunities for Ecopetrol and EQRx

0.0

Correlation Coefficient

Ecopetrol  EQRx

Pay attention - limited upside

The 3 months correlation between Ecopetrol and EQRx is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and EQRx Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EQRx Inc 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 EQRx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EQRx Inc has no effect on the direction of Ecopetrol i.e., Ecopetrol and EQRx go up and down completely randomly.

Pair Corralation between Ecopetrol and EQRx

If you would invest  793.00  in Ecopetrol SA ADR on December 1, 2024 and sell it today you would earn a total of  195.00  from holding Ecopetrol SA ADR or generate 24.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Ecopetrol SA ADR  vs.  EQRx Inc

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 13 (%) 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.

EQRx Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days EQRx Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, EQRx is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Ecopetrol and EQRx

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

The idea behind Ecopetrol SA ADR and EQRx Inc 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.