Correlation Between Ecopetrol and IX Acquisition

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

Diversification Opportunities for Ecopetrol and IX Acquisition

0.69

Correlation Coefficient

Ecopetrol  IX Acquisition

Poor diversification

The 3 months correlation between Ecopetrol and IXAQ is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and IX Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IX Acquisition Corp 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 IX Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IX Acquisition Corp has no effect on the direction of Ecopetrol i.e., Ecopetrol and IX Acquisition go up and down completely randomly.

Pair Corralation between Ecopetrol and IX Acquisition

Allowing for the 90-day total investment horizon Ecopetrol SA ADR is expected to generate 16.39 times more return on investment than IX Acquisition. However, Ecopetrol is 16.39 times more volatile than IX Acquisition Corp. It trades about 0.17 of its potential returns per unit of risk. IX Acquisition Corp is currently generating about 0.14 per unit of risk. 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	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Ecopetrol SA ADR  vs.  IX Acquisition Corp

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.

IX Acquisition Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IX Acquisition Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, IX Acquisition is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Ecopetrol and IX Acquisition

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

The idea behind Ecopetrol SA ADR and IX Acquisition Corp 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.