Correlation Between Ecopetrol and Oregon Pacific

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

Diversification Opportunities for Ecopetrol and Oregon Pacific

0.69

Correlation Coefficient

Ecopetrol  Oregon Pacific

Poor diversification

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

Pair Corralation between Ecopetrol and Oregon Pacific

Allowing for the 90-day total investment horizon Ecopetrol is expected to generate 1.24 times less return on investment than Oregon Pacific. In addition to that, Ecopetrol is 3.4 times more volatile than Oregon Pacific Bancorp. It trades about 0.05 of its total potential returns per unit of risk. Oregon Pacific Bancorp is currently generating about 0.23 per unit of volatility. If you would invest  800.00  in Oregon Pacific Bancorp on December 1, 2024 and sell it today you would earn a total of  32.00  from holding Oregon Pacific Bancorp or generate 4.0% 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.  Oregon Pacific Bancorp

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.

Oregon Pacific Bancorp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oregon Pacific Bancorp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Oregon Pacific is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ecopetrol and Oregon Pacific

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

The idea behind Ecopetrol SA ADR and Oregon Pacific Bancorp 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.