Correlation Between VinFast Auto and Ecopetrol

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

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

Diversification Opportunities for VinFast Auto and Ecopetrol

-0.39

Correlation Coefficient

VinFast Auto  Ecopetrol

Very good diversification

The 3 months correlation between VinFast and Ecopetrol is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding VinFast Auto Ltd 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 VinFast Auto 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 VinFast Auto Ltd 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 VinFast Auto i.e., VinFast Auto and Ecopetrol go up and down completely randomly.

Pair Corralation between VinFast Auto and Ecopetrol

Considering the 90-day investment horizon VinFast Auto Ltd is expected to generate 8.59 times more return on investment than Ecopetrol. However, VinFast Auto is 8.59 times more volatile than Ecopetrol SA ADR. It trades about 0.04 of its potential returns per unit of risk. Ecopetrol SA ADR is currently generating about 0.02 per unit of risk. If you would invest  1,045  in VinFast Auto Ltd on March 5, 2024 and sell it today you would lose (556.00) from holding VinFast Auto Ltd or give up 53.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	41.01%
Values	Daily Returns

VinFast Auto Ltd  vs.  Ecopetrol SA ADR

VinFast Auto

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in VinFast Auto Ltd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, VinFast Auto unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ecopetrol SA ADR

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ecopetrol SA ADR are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting fundamental indicators, Ecopetrol exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VinFast Auto and Ecopetrol

The main advantage of trading using opposite VinFast Auto and Ecopetrol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VinFast Auto 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 VinFast Auto Ltd and Ecopetrol SA ADR 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.

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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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.