Correlation Between Ecopetrol and PayPal Holdings

Can any of the company-specific risk be diversified away by investing in both Ecopetrol and PayPal Holdings 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 PayPal Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ecopetrol SA and PayPal Holdings, you can compare the effects of market volatilities on Ecopetrol and PayPal Holdings 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 PayPal Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and PayPal Holdings.

Diversification Opportunities for Ecopetrol and PayPal Holdings

0.0

Correlation Coefficient

Ecopetrol  PayPal Holdings

Pay attention - limited upside

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

Pair Corralation between Ecopetrol and PayPal Holdings

If you would invest  8,453  in PayPal Holdings on October 7, 2024 and sell it today you would earn a total of  1.00  from holding PayPal Holdings or generate 0.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Ecopetrol SA  vs.  PayPal Holdings

Ecopetrol SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ecopetrol SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Ecopetrol is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

PayPal Holdings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PayPal Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, PayPal Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ecopetrol and PayPal Holdings

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

The idea behind Ecopetrol SA and PayPal Holdings 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.