Correlation Between Ecopetrol and SOLOCAL GROUP
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and SOLOCAL GROUP 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 SOLOCAL GROUP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecopetrol SA and SOLOCAL GROUP, you can compare the effects of market volatilities on Ecopetrol and SOLOCAL GROUP 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 SOLOCAL GROUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and SOLOCAL GROUP.
Diversification Opportunities for Ecopetrol and SOLOCAL GROUP
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ecopetrol and SOLOCAL is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA and SOLOCAL GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOLOCAL GROUP 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 SOLOCAL GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOLOCAL GROUP has no effect on the direction of Ecopetrol i.e., Ecopetrol and SOLOCAL GROUP go up and down completely randomly.
Pair Corralation between Ecopetrol and SOLOCAL GROUP
Assuming the 90 days trading horizon Ecopetrol SA is expected to generate 1.47 times more return on investment than SOLOCAL GROUP. However, Ecopetrol is 1.47 times more volatile than SOLOCAL GROUP. It trades about -0.09 of its potential returns per unit of risk. SOLOCAL GROUP is currently generating about -0.75 per unit of risk. If you would invest 760.00 in Ecopetrol SA on September 26, 2024 and sell it today you would lose (32.00) from holding Ecopetrol SA or give up 4.21% 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. SOLOCAL GROUP
Performance |
Timeline |
Ecopetrol SA |
SOLOCAL GROUP |
Ecopetrol and SOLOCAL GROUP Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ecopetrol and SOLOCAL GROUP
The main advantage of trading using opposite Ecopetrol and SOLOCAL GROUP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, SOLOCAL GROUP 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 SOLOCAL GROUP will offset losses from the drop in SOLOCAL GROUP's long position.The idea behind Ecopetrol SA and SOLOCAL GROUP 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.SOLOCAL GROUP vs. Apple Inc | SOLOCAL GROUP vs. Apple Inc | SOLOCAL GROUP vs. Apple Inc | SOLOCAL GROUP vs. Apple Inc |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
Other Complementary Tools
Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm |