Correlation Between Ecopetrol and First Financial

Can any of the company-specific risk be diversified away by investing in both Ecopetrol and First Financial 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 First Financial 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 First Financial Bancorp, you can compare the effects of market volatilities on Ecopetrol and First Financial 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 First Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopetrol and First Financial.

Diversification Opportunities for Ecopetrol and First Financial

0.78

Correlation Coefficient

Ecopetrol  First Financial

Poor diversification

The 3 months correlation between Ecopetrol and First is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA ADR and First Financial Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Financial Bancorp 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 First Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Financial Bancorp has no effect on the direction of Ecopetrol i.e., Ecopetrol and First Financial go up and down completely randomly.

Pair Corralation between Ecopetrol and First Financial

Allowing for the 90-day total investment horizon Ecopetrol SA ADR is expected to generate 0.91 times more return on investment than First Financial. However, Ecopetrol SA ADR is 1.1 times less risky than First Financial. It trades about 0.03 of its potential returns per unit of risk. First Financial Bancorp is currently generating about -0.03 per unit of risk. If you would invest  884.00  in Ecopetrol SA ADR on July 19, 2025 and sell it today you would earn a total of  20.00  from holding Ecopetrol SA ADR or generate 2.26% return on investment over 90 days.

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

Ecopetrol SA ADR  vs.  First Financial Bancorp

Ecopetrol SA ADR

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ecopetrol SA ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Ecopetrol is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

First Financial Bancorp

Risk-Adjusted Performance

Weakest

Over the last 90 days First Financial Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, First Financial is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ecopetrol and First Financial

The main advantage of trading using opposite Ecopetrol and First Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecopetrol position performs unexpectedly, First Financial 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 First Financial will offset losses from the drop in First Financial's long position.

The idea behind Ecopetrol SA ADR and First Financial Bancorp 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.