Correlation Between Ecopetrol and TPT Strategic

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

Diversification Opportunities for Ecopetrol and TPT Strategic

-0.37

Correlation Coefficient

Ecopetrol  TPT Strategic

Very good diversification

The 3 months correlation between Ecopetrol and TPT is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and TPT Strategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPT Strategic 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 TPT Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPT Strategic has no effect on the direction of Ecopetrol i.e., Ecopetrol and TPT Strategic go up and down completely randomly.

Pair Corralation between Ecopetrol and TPT Strategic

Allowing for the 90-day total investment horizon Ecopetrol SA ADR is expected to under-perform the TPT Strategic. But the stock apears to be less risky and, when comparing its historical volatility, Ecopetrol SA ADR is 20.76 times less risky than TPT Strategic. The stock trades about -0.17 of its potential returns per unit of risk. The TPT Strategic is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  208.00  in TPT Strategic on September 29, 2024 and sell it today you would earn a total of  716.00  from holding TPT Strategic or generate 344.23% return on investment over 90 days.

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

Ecopetrol SA ADR  vs.  TPT Strategic

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 conflicting 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.

TPT Strategic

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TPT Strategic are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, TPT Strategic reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ecopetrol and TPT Strategic

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

The idea behind Ecopetrol SA ADR and TPT Strategic 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.