Correlation Between Suncor Energy and Ecopetrol
Can any of the company-specific risk be diversified away by investing in both Suncor 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 Suncor Energy and Ecopetrol into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Suncor Energy and Ecopetrol SA ADR, you can compare the effects of market volatilities on Suncor 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 Suncor Energy with a short position of Ecopetrol. Check out your portfolio center. Please also check ongoing floating volatility patterns of Suncor Energy and Ecopetrol.
Diversification Opportunities for Suncor Energy and Ecopetrol
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Suncor and Ecopetrol is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Suncor Energy 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 Suncor 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 Suncor Energy 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 Suncor Energy i.e., Suncor Energy and Ecopetrol go up and down completely randomly.
Pair Corralation between Suncor Energy and Ecopetrol
Allowing for the 90-day total investment horizon Suncor Energy is expected to generate 0.66 times more return on investment than Ecopetrol. However, Suncor Energy is 1.52 times less risky than Ecopetrol. It trades about 0.28 of its potential returns per unit of risk. Ecopetrol SA ADR is currently generating about 0.13 per unit of risk. If you would invest 3,691 in Suncor Energy on January 29, 2024 and sell it today you would earn a total of 250.00 from holding Suncor Energy or generate 6.77% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 95.45% |
Values | Daily Returns |
Suncor Energy vs. Ecopetrol SA ADR
Performance |
Timeline |
Suncor Energy |
Ecopetrol SA ADR |
Suncor Energy and Ecopetrol Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Suncor Energy and Ecopetrol
The main advantage of trading using opposite Suncor Energy and Ecopetrol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Suncor 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.Suncor Energy vs. Imperial Oil | Suncor Energy vs. Ecopetrol SA ADR | Suncor Energy vs. Petroleo Brasileiro Petrobras | Suncor Energy vs. Equinor ASA ADR |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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