Correlation Between Equinor ASA and Ecopetrol
Can any of the company-specific risk be diversified away by investing in both Equinor ASA 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 Equinor ASA and Ecopetrol into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equinor ASA ADR and Ecopetrol SA ADR, you can compare the effects of market volatilities on Equinor ASA 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 Equinor ASA with a short position of Ecopetrol. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equinor ASA and Ecopetrol.
Diversification Opportunities for Equinor ASA and Ecopetrol
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Equinor and Ecopetrol is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Equinor ASA ADR and Ecopetrol SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecopetrol SA ADR and Equinor ASA 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 Equinor ASA ADR 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 ADR has no effect on the direction of Equinor ASA i.e., Equinor ASA and Ecopetrol go up and down completely randomly.
Pair Corralation between Equinor ASA and Ecopetrol
Given the investment horizon of 90 days Equinor ASA ADR is expected to generate 0.52 times more return on investment than Ecopetrol. However, Equinor ASA ADR is 1.91 times less risky than Ecopetrol. It trades about 0.22 of its potential returns per unit of risk. Ecopetrol SA ADR is currently generating about 0.07 per unit of risk. If you would invest 2,476 in Equinor ASA ADR on January 25, 2024 and sell it today you would earn a total of 234.00 from holding Equinor ASA ADR or generate 9.45% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Equinor ASA ADR vs. Ecopetrol SA ADR
Performance |
Timeline |
Equinor ASA ADR |
Ecopetrol SA ADR |
Equinor ASA and Ecopetrol Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Equinor ASA and Ecopetrol
The main advantage of trading using opposite Equinor ASA and Ecopetrol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equinor ASA 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.Equinor ASA vs. Shell PLC ADR | Equinor ASA vs. BP PLC ADR | Equinor ASA vs. Eni SpA ADR | Equinor ASA vs. Galp Energa |
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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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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