Correlation Between Savoy Energy and Ecopetrol

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

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

Diversification Opportunities for Savoy Energy and Ecopetrol

0.0

Correlation Coefficient

Savoy Energy  Ecopetrol

Pay attention - limited upside

The 3 months correlation between Savoy and Ecopetrol is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Savoy Energy Corp 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 Savoy Energy 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 Savoy Energy Corp 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 Savoy Energy i.e., Savoy Energy and Ecopetrol go up and down completely randomly.

Pair Corralation between Savoy Energy and Ecopetrol

If you would invest  0.01  in Savoy Energy Corp on September 4, 2024 and sell it today you would earn a total of  0.00  from holding Savoy Energy Corp or generate 0.0% return on investment over 90 days.

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

Savoy Energy Corp  vs.  Ecopetrol SA ADR

Savoy Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Savoy Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Savoy Energy is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Ecopetrol SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ecopetrol SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Savoy Energy and Ecopetrol

The main advantage of trading using opposite Savoy Energy and Ecopetrol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Savoy Energy 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 Savoy Energy Corp 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..