Correlation Between Ecopetrol and INVO Old

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

Diversification Opportunities for Ecopetrol and INVO Old

0.0

Correlation Coefficient

Ecopetrol  INVO Old

Pay attention - limited upside

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

Pair Corralation between Ecopetrol and INVO Old

If you would invest  803.00  in Ecopetrol SA ADR on November 29, 2024 and sell it today you would earn a total of  187.00  from holding Ecopetrol SA ADR or generate 23.29% 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.  INVO Old

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 12 (%) 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.

INVO Old

Risk-Adjusted Performance

Very Weak

Over the last 90 days INVO Old has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, INVO Old is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ecopetrol and INVO Old

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

The idea behind Ecopetrol SA ADR and INVO Old 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.