Correlation Between Ecopetrol and CBRE Group

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

Diversification Opportunities for Ecopetrol and CBRE Group

-0.75

Correlation Coefficient

Ecopetrol  CBRE Group

Pay attention - limited upside

The 3 months correlation between Ecopetrol and CBRE is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA and CBRE Group Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CBRE Group Class 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 CBRE Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CBRE Group Class has no effect on the direction of Ecopetrol i.e., Ecopetrol and CBRE Group go up and down completely randomly.

Pair Corralation between Ecopetrol and CBRE Group

Assuming the 90 days trading horizon Ecopetrol SA is expected to under-perform the CBRE Group. In addition to that, Ecopetrol is 1.0 times more volatile than CBRE Group Class. It trades about -0.1 of its total potential returns per unit of risk. CBRE Group Class is currently generating about 0.19 per unit of volatility. If you would invest  10,300  in CBRE Group Class on September 2, 2024 and sell it today you would earn a total of  2,900  from holding CBRE Group Class or generate 28.16% return on investment over 90 days.

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

Ecopetrol SA  vs.  CBRE Group Class

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

CBRE Group Class

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CBRE Group Class are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CBRE Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ecopetrol and CBRE Group

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

The idea behind Ecopetrol SA and CBRE Group Class 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.