Correlation Between Salesforce and Ecopetrol

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

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

Diversification Opportunities for Salesforce and Ecopetrol

-0.24

Correlation Coefficient

Salesforce  Ecopetrol

Very good diversification

The 3 months correlation between Salesforce and Ecopetrol is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Ecopetrol SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecopetrol SA and Salesforce 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 Salesforce are associated (or correlated) with Ecopetrol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecopetrol SA has no effect on the direction of Salesforce i.e., Salesforce and Ecopetrol go up and down completely randomly.

Pair Corralation between Salesforce and Ecopetrol

Assuming the 90 days trading horizon Salesforce is expected to under-perform the Ecopetrol. But the stock apears to be less risky and, when comparing its historical volatility, Salesforce is 2.62 times less risky than Ecopetrol. The stock trades about -0.24 of its potential returns per unit of risk. The Ecopetrol SA is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  746.00  in Ecopetrol SA on October 9, 2024 and sell it today you would earn a total of  44.00  from holding Ecopetrol SA or generate 5.9% return on investment over 90 days.

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

Salesforce  vs.  Ecopetrol SA

Salesforce

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Salesforce unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ecopetrol SA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ecopetrol SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Ecopetrol is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Salesforce and Ecopetrol

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

The idea behind Salesforce and Ecopetrol SA 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .