Correlation Between Ecopetrol and Imperial Oil
Can any of the company-specific risk be diversified away by investing in both Ecopetrol and Imperial Oil 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 Imperial Oil 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 Imperial Oil, you can compare the effects of market volatilities on Ecopetrol and Imperial Oil 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 Imperial Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and Imperial Oil.
Diversification Opportunities for Ecopetrol and Imperial Oil
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ecopetrol and Imperial is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and Imperial Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Oil 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 Imperial Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imperial Oil has no effect on the direction of Ecopetrol i.e., Ecopetrol and Imperial Oil go up and down completely randomly.
Pair Corralation between Ecopetrol and Imperial Oil
Allowing for the 90-day total investment horizon Ecopetrol SA ADR is expected to under-perform the Imperial Oil. But the stock apears to be less risky and, when comparing its historical volatility, Ecopetrol SA ADR is 1.02 times less risky than Imperial Oil. The stock trades about -0.01 of its potential returns per unit of risk. The Imperial Oil is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 6,993 in Imperial Oil on February 12, 2024 and sell it today you would lose (8.00) from holding Imperial Oil or give up 0.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ecopetrol SA ADR vs. Imperial Oil
Performance |
| Timeline |
| Ecopetrol SA ADR |
| Imperial Oil |
Ecopetrol and Imperial Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecopetrol and Imperial Oil
The main advantage of trading using opposite Ecopetrol and Imperial Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, Imperial Oil 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 Imperial Oil will offset losses from the drop in Imperial Oil's long position.| Ecopetrol vs. MIRA Pharmaceuticals Common | Ecopetrol vs. Planet Fitness | Ecopetrol vs. Griffon | Ecopetrol vs. Terawulf |
| Imperial Oil vs. MIRA Pharmaceuticals Common | Imperial Oil vs. Planet Fitness | Imperial Oil vs. Griffon | Imperial Oil vs. Terawulf |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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