Correlation Between Chevron and Ecopetrol

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

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

Diversification Opportunities for Chevron and Ecopetrol

0.54

Correlation Coefficient

Chevron  Ecopetrol

Very weak diversification

The 3 months correlation between Chevron and Ecopetrol is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Chevron and Ecopetrol SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecopetrol SA and Chevron 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 Chevron 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 has no effect on the direction of Chevron i.e., Chevron and Ecopetrol go up and down completely randomly.

Pair Corralation between Chevron and Ecopetrol

Assuming the 90 days trading horizon Chevron is expected to generate 0.62 times more return on investment than Ecopetrol. However, Chevron is 1.62 times less risky than Ecopetrol. It trades about 0.1 of its potential returns per unit of risk. Ecopetrol SA is currently generating about 0.01 per unit of risk. If you would invest  11,752  in Chevron on April 22, 2025 and sell it today you would earn a total of  1,044  from holding Chevron or generate 8.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Chevron  vs.  Ecopetrol SA

Chevron

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Chevron may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Ecopetrol SA

Risk-Adjusted Performance

Weak

Over the last 90 days Ecopetrol SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Ecopetrol is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Chevron and Ecopetrol

The main advantage of trading using opposite Chevron and Ecopetrol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron 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 Chevron and Ecopetrol SA 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.