Correlation Between Ecopetrol and United Internet

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

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

Diversification Opportunities for Ecopetrol and United Internet

0.59

Correlation Coefficient

Ecopetrol  United Internet

Very weak diversification

The 3 months correlation between Ecopetrol and United is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Ecopetrol SA and United Internet AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Internet AG 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 are associated (or correlated) with United Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Internet AG has no effect on the direction of Ecopetrol i.e., Ecopetrol and United Internet go up and down completely randomly.

Pair Corralation between Ecopetrol and United Internet

Assuming the 90 days trading horizon Ecopetrol is expected to generate 14.28 times less return on investment than United Internet. But when comparing it to its historical volatility, Ecopetrol SA is 1.22 times less risky than United Internet. It trades about 0.02 of its potential returns per unit of risk. United Internet AG is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,810  in United Internet AG on April 23, 2025 and sell it today you would earn a total of  660.00  from holding United Internet AG or generate 36.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Ecopetrol SA  vs.  United Internet AG

Ecopetrol SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ecopetrol SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Ecopetrol is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

United Internet AG

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in United Internet AG are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, United Internet reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ecopetrol and United Internet

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

The idea behind Ecopetrol SA and United Internet AG 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.