Correlation Between Ecopetrol and Fair Isaac

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

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

Diversification Opportunities for Ecopetrol and Fair Isaac

-0.42

Correlation Coefficient

Ecopetrol  Fair Isaac

Very good diversification

The 3 months correlation between Ecopetrol and Fair is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA and Fair Isaac in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fair Isaac 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 Fair Isaac. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fair Isaac has no effect on the direction of Ecopetrol i.e., Ecopetrol and Fair Isaac go up and down completely randomly.

Pair Corralation between Ecopetrol and Fair Isaac

Assuming the 90 days trading horizon Ecopetrol SA is expected to generate 0.92 times more return on investment than Fair Isaac. However, Ecopetrol SA is 1.08 times less risky than Fair Isaac. It trades about -0.05 of its potential returns per unit of risk. Fair Isaac is currently generating about -0.22 per unit of risk. If you would invest  746.00  in Ecopetrol SA on September 27, 2024 and sell it today you would lose (18.00) from holding Ecopetrol SA or give up 2.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Ecopetrol SA  vs.  Fair Isaac

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Fair Isaac

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fair Isaac are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Fair Isaac reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ecopetrol and Fair Isaac

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

The idea behind Ecopetrol SA and Fair Isaac 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.