Correlation Between Ecopetrol and BP PLC
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and BP PLC 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 BP PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecopetrol SA ADR and BP PLC ADR, you can compare the effects of market volatilities on Ecopetrol and BP PLC 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 BP PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and BP PLC.
Diversification Opportunities for Ecopetrol and BP PLC
Weak diversification
The 3 months correlation between Ecopetrol and BP PLC is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and BP PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP PLC ADR 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 ADR are associated (or correlated) with BP PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BP PLC ADR has no effect on the direction of Ecopetrol i.e., Ecopetrol and BP PLC go up and down completely randomly.
Pair Corralation between Ecopetrol and BP PLC
Allowing for the 90-day total investment horizon Ecopetrol is expected to generate 5.11 times less return on investment than BP PLC. In addition to that, Ecopetrol is 1.48 times more volatile than BP PLC ADR. It trades about 0.02 of its total potential returns per unit of risk. BP PLC ADR is currently generating about 0.17 per unit of volatility. If you would invest 3,520 in BP PLC ADR on January 27, 2024 and sell it today you would earn a total of 442.00 from holding BP PLC ADR or generate 12.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ecopetrol SA ADR vs. BP PLC ADR
Performance |
| Timeline |
| Ecopetrol SA ADR |
| BP PLC ADR |
Ecopetrol and BP PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and BP PLC
The main advantage of trading using opposite Ecopetrol and BP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, BP PLC 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 BP PLC will offset losses from the drop in BP PLC's long position.| Ecopetrol vs. Petroleo Brasileiro Petrobras | Ecopetrol vs. Equinor ASA ADR | Ecopetrol vs. Eni SpA ADR | Ecopetrol vs. Cenovus Energy |
| BP PLC vs. TotalEnergies SE ADR | BP PLC vs. Chevron Corp | BP PLC vs. Exxon Mobil Corp | BP PLC vs. Equinor ASA ADR |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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