Correlation Between Ecopetrol and METAIR INVTS

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

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

Diversification Opportunities for Ecopetrol and METAIR INVTS

0.66

Correlation Coefficient

Ecopetrol  METAIR INVTS

Poor diversification

The 3 months correlation between Ecopetrol and METAIR is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA and METAIR INVTS LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on METAIR INVTS LTD 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 METAIR INVTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of METAIR INVTS LTD has no effect on the direction of Ecopetrol i.e., Ecopetrol and METAIR INVTS go up and down completely randomly.

Pair Corralation between Ecopetrol and METAIR INVTS

Assuming the 90 days trading horizon Ecopetrol SA is expected to under-perform the METAIR INVTS. But the stock apears to be less risky and, when comparing its historical volatility, Ecopetrol SA is 1.51 times less risky than METAIR INVTS. The stock trades about -0.01 of its potential returns per unit of risk. The METAIR INVTS LTD is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  54.00  in METAIR INVTS LTD on September 19, 2024 and sell it today you would earn a total of  3.00  from holding METAIR INVTS LTD or generate 5.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Ecopetrol SA  vs.  METAIR INVTS LTD

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.

METAIR INVTS LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days METAIR INVTS LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Ecopetrol and METAIR INVTS

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

The idea behind Ecopetrol SA and METAIR INVTS LTD 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.