Correlation Between Ecopetrol and Parks America

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

Diversification Opportunities for Ecopetrol and Parks America

-0.45
  Correlation Coefficient

Very good diversification

The 3 months correlation between Ecopetrol and Parks is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and Parks America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parks America 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 Parks America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parks America has no effect on the direction of Ecopetrol i.e., Ecopetrol and Parks America go up and down completely randomly.

Pair Corralation between Ecopetrol and Parks America

Allowing for the 90-day total investment horizon Ecopetrol SA ADR is expected to under-perform the Parks America. But the stock apears to be less risky and, when comparing its historical volatility, Ecopetrol SA ADR is 2.19 times less risky than Parks America. The stock trades about -0.11 of its potential returns per unit of risk. The Parks America is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  43.00  in Parks America on September 18, 2024 and sell it today you would earn a total of  0.00  from holding Parks America or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy98.44%
ValuesDaily Returns

Ecopetrol SA ADR  vs.  Parks America

 Performance 
       Timeline  
Ecopetrol SA ADR 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 inconsistent 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.
Parks America 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Parks America are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward-looking signals, Parks America is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ecopetrol and Parks America Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ecopetrol and Parks America

The main advantage of trading using opposite Ecopetrol and Parks America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, Parks America 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 Parks America will offset losses from the drop in Parks America's long position.
The idea behind Ecopetrol SA ADR and Parks America 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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