Correlation Between Ecopetrol and Noble Rock

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

Diversification Opportunities for Ecopetrol and Noble Rock

-0.65

Correlation Coefficient

Ecopetrol  Noble Rock

Excellent diversification

The 3 months correlation between Ecopetrol and Noble is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and Noble Rock Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Noble Rock Acquisition 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 Noble Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Noble Rock Acquisition has no effect on the direction of Ecopetrol i.e., Ecopetrol and Noble Rock go up and down completely randomly.

Pair Corralation between Ecopetrol and Noble Rock

If you would invest  761.00  in Ecopetrol SA ADR on September 3, 2024 and sell it today you would earn a total of  42.00  from holding Ecopetrol SA ADR or generate 5.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	5.0%
Values	Daily Returns

Ecopetrol SA ADR  vs.  Noble Rock Acquisition

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.

Noble Rock Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Noble Rock Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Noble Rock is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ecopetrol and Noble Rock

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

The idea behind Ecopetrol SA ADR and Noble Rock Acquisition 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.