QUANTITATIVE AND FUNDAMENTAL ANALYSIS OF ISA (INTERCONEXIÓN ELÉCTRICA S.A. E.S.P.): RISK ASSESSMENT, VOLATILITY, AND PRICE PROJECTIONS

 

ISA (Interconexión Eléctrica S.A. E.S.P.) is a key player in Latin American infrastructure and one of the largest and most diversified Colombian business groups.

ISA, whose majority shareholder is Ecopetrol, is a multinational group (with a presence in several Latin American countries and even the United States) primarily dedicated to infrastructure. Its three key business lines are:

Electric Power Transmission. ISA is a leading player in electric power transmission in Latin America. Its function is to transport energy from generation centers to distribution and consumption centers through high-voltage systems. It owns a vast transmission infrastructure in the region, including more than 46,000 km of circuits. Its subsidiary XM manages the wholesale energy market in Colombia.

Roads and highway concessions. ISA manages road and highway infrastructure through concessions. It designs, builds, operates, and maintains roads, such as those managed by its subsidiary ISA INTERVIAL in Chile and the Cartagena-Barranquilla Coastal Concession in Colombia.

Telecommunications and ICT. Through its subsidiary InterNexa, the company offers digital and connectivity solutions, operating an extensive terrestrial and submarine fiber optic network.

This network extends from Florida to Patagonia. As a large, publicly traded company (part of the Ecopetrol Group (ISA) reports its financial results quarterly and annually in accordance with International Financial Reporting Standards (IFRS).

To find the details of its balance sheet and income statement (also called the statement of comprehensive income), you must consult the financial results reports and integrated management reports published in its investor relations section.

The balance sheet presents ISA's financial position at a specific point in time (for example, as of December 31). It is structured around the fundamental accounting equation: assets = liabilities + equity.

As of the end of September 2022, the consolidated assets of ISA and its companies totaled COP 71.8 trillion, reflecting growth from new energy projects and investments in contractual assets.

The income statement shows ISA's financial performance over a period of time (a quarter or a year). Its objective is to determine net income or loss.

The first step is to understand the nature of the historical data for the ISA variable. ISA's historical growth has demonstrated positive long-term profitability, albeit with considerable volatility. The distribution of its values ​​suggests that it has experienced growth peaks more frequently or of greater magnitude than extreme drops.

Analyzing the frequency distribution is key to understanding the probability of falling within certain value ranges. There is a 57.26% probability that ISA's historical value has been less than or equal to 14,419. Conversely, there is a 42.74% (100% − 57.26%) probability that the value has The price has been higher than 14,419. The most frequent value (mode) is 19,000, which falls within the range of 17,420–20,419. This is a powerful metric indicating that the stock spends a significant amount of time above the mean (14,526.65).

 

The cumulative probability allows you to establish historical risk. If today's price is below 14,419, history suggests a high probability of seeing a higher price in the future. If the price is above 17,420, the cumulative probability suggests you are in the upper quartile of historical prices.

The short- and medium-term forecasts are crucial for today's decision; all three forecasts suggest a significant increase in price, exceeding both the historical mode (19,000) and the mean (14,526.65).

The polynomial correlation of order 6 (96.08%) is exceptionally high. This suggests that the model producing the 180-day forecast is the most reliable and accurate based on its fit to historical data.

The information strongly points to a medium-term decision for the following reasons: the 180-day forecast model correlates with 96.08%, indicating that it is the forecast with the highest statistical confidence.

The projected value for 180 days (21,542.72) represents a substantial profit point, exceeding almost 85% of the historical price action.

The high degree of volatility (standard deviation) makes the short-term (90 days) riskier despite a positive forecast. The market can be erratic during that period The medium term, with its projected high correlation, offers a better balance between risk and reward.

If the current value is low (near or below the average of 14,526.65), evidence suggests a high historical probability (over 42%) of seeing higher values. A buy position with a 180-day investment horizon is recommended to maximize the probability of reaching the projected value of 21,542.72.

If the current value is high (near or above 20,000): consider whether the potential gain at 21,542.72 justifies the risk. If you already have a position, you could consider holding it for the 180 days or taking profits if the price is already very close to the forecast.

Statistical analysis supports an informed buy/hold decision with a strategic focus on the medium-term (180-day) horizon.

The dataset, spanning from the start of the study (approximately January 4, 2010) to December 10, 2025, shows the price evolution of ISA shares, reaching a final value of 25,100.

The chart above (Interconnection Electricity (ISA)) shows a general upward trend over the long term, despite significant fluctuations. An initial price of approximately 2,960 and a final price of 25,100 are observed, indicating substantial appreciation over the analyzed period.

The overall return over the period is very positive. The correlation (0.5422) indicates that the simple linear model explains approximately 54.22% of the price variability, suggesting that the linear trend is moderately representative.

Being of a higher order (order 6), it fits price fluctuations much better, capturing the shape of the curve more accurately.

The use of trend models is crucial for time series analysis. The correlations are then compared to determine which model best fits the historical data and, therefore, offers a more reliable forecast.

The linear correlation (73.57%) indicates a moderate positive relationship between time and price, confirming the upward trend. However, it does not capture the cyclical or highly volatile nature of stocks.

The polynomial correlation of order 3 (96.08%) and especially order 6 (98.24%) exhibits extremely high correlations. This means that the polynomial model of order 6 best fits the historical price curve (i.e., the best fit).

The 360-day forecast based on the linear correlation is 22,137.41. The forecast based on the third-order polynomial is 22,572.77. The forecast based on the sixth-order polynomial is 22,383.92.

The sixth-order polynomial forecast is the most reliable in terms of best historical fit (98%). However, it is important to remember that very high-order models can overfit the data and fail to predict the future. Overall, all models project a slight drop in price compared to the current closing price (25,100), suggesting a possible short-term correction or consolidation phase.

The fact that the mode > mean > median (19,000 > 14,528.64 > 13,700) indicates a distribution with negative skewness (to the left). Most of the values ​​(the mode) are concentrated on the right (high values), while the mean is pulled to the left by the presence of low outliers. This confirms that the ISA price or return distribution is not a symmetrical normal distribution (Gaussian bell curve). This is a typical finding in financial series analysis.

Standard Deviation: 5,609.67 (or 80.837 for the standard error of the mean). This is a measure of the stock's volatility or risk. A high value (5,609.67) relative to the mean (14,528.64) indicates that the price has fluctuated considerably over time.

Kurtosis is the fourth standard moment and measures the degree of peakedness (concentration around the mean) and, more importantly, the thickness of the tails of a random variable's distribution. Its kurtosis (0.932): The value 0.932 is Fisher's excess kurtosis (actual kurtosis - 3). Since it is greater than 0, the ISA distribution is leptokurtic.

In finance, a leptokurtic distribution indicates that, compared to a normal distribution, there is a greater concentration of data near the mean (higher peak). Most importantly, the tails are thicker (higher probability of extreme events).

Kurtosis is vital because it helps estimate tail risk. Leptokurtosis implies a higher probability of observing extremely large price movements or returns, both positive and negative, meaning that the risk of massive losses (or unexpected gains) is greater than the Gaussian bell curve model would predict. Studying it is essential for sizing The risk of catastrophic events is accurately estimated, which the standard deviation alone would underestimate.

The histogram and frequency polygon visually confirm the statistical diagnosis. * Analysis: * The distribution is not a perfect, symmetrical Gaussian bell curve. * The highest frequency bar (mode) is in the 14,420-17,419 range, while the mean is 14,528.64. * The distribution has a shape that demonstrates the previously identified negative skew, with a more dispersed tail to the left. * The extremes or "tails" of the distribution (lowest and highest ranges) have non-zero frequencies, which visually supports the leptokurtosis result.

 

Investment decisions always combine quantitative analysis (like the one we just performed) with fundamental analysis and current market conditions.

My research indicates the following (source: December 2025 news): ISA reported a 17% drop in net income and a reduction in EBITDA margin in the first nine months of 2025. Factors such as regulatory adjustments and non-recurring events are mentioned. ISA remains the largest electricity transmission company in Latin America, with a business model based on long-term regulated contracts that guarantee stable cash flows. It maintains the highest local risk rating (AAA). The company is making significant infrastructure investments and has been backed by Grupo Ecopetrol (its subsidiary) since 2021, providing financial support and synergies in the energy transition.

Technical indicators are used to measure the momentum, speed, and volatility of a stock's price.

The MACD (12.26), Highs/Lows (14), Ultimate Oscillator, ROC, and Stochastic Oscillator (14) indicate upward momentum. This suggests that, at the time of analysis (December 11, 2025), the stock still maintains a positive short- and medium-term trend.

The Stochastic Oscillator (9.6) and Williams %R show overbought conditions. This means that the price has risen very rapidly and could be nearing a correction or pause, justifying the "cautionary decision-making" mentioned.

The RSI (14) and CCI (14) are neutral, indicating that the current trend is neither extremely strong nor weak.

The ADX (14) and Bull/Bear Power (13) suggest selling pressure or an emerging downtrend, although they are in the minority.

Moving averages smooth out price action to identify the direction of the long-term trend. Long-Term Uptrend: The slower moving averages (MA20, MA50, MA100, MA200) indicate a buy signal. This is a very strong indication that the stock's main trend is bullish.

The faster moving averages (MA5 and MA10), both simple and exponential, indicate a sell signal. This corroborates the overbought/correction risk signaled by the oscillators. It suggests that the recent closing price is below its 5- and 10-day moving averages, which could indicate an imminent pullback or profit-taking.

The stock is in a strong long-term uptrend, but is currently under very short-term bearish pressure, reinforcing the need for caution.

Classic pivot point 25,533.3. If the price is below this level, the stock is in short-term bearish territory; if it is above, it is bullish.

The last close (17,560) and the day's range (24,920.0–25,340.0) suggest that the stock has been trading below most of the Resistance pivot points (R1, R2, R3) and closer to the Support levels (S1, S2, S3), reinforcing the idea of ​​short-term selling pressure (25,533.3 is above the day's range).

The technical-fundamental analysis presents a classic dichotomy in trading: the year-to-date change (61.1%), the long-term trend of the moving averages (MA20 to MA200 in Buy), the low beta (0.36), and the high cumulative probability (98.20%) suggest that the stock is fundamentally sound and has a strong long-term uptrend.

The oscillators in "Overbought" (STOCH, Williams %R) and the fast-moving averages in "Sell" (MA5, MA10) indicate that the price has risen too quickly and is very likely to experience a correction, consolidation, or pause in the very short term.

The current risk is focused on a short-term technical correction (due to overbought conditions) rather than a major trend reversal (which remains bullish). The "moderation" recommendation is the most appropriate. If considering a buy position, it's recommended to wait for the stock to pull back to a key support level (e.g., the 20-day moving average, 50-day moving average, or a pivot point level S1/S2) before entering with a wider margin of safety. Consider that the long-term momentum may be too strong to warrant a stop-loss, but use a tight stop-loss order Below the most relevant fast moving average (e.g., exponential MA5) to limit the risk of a short-term correction.

Statistically, the current moment (with the price at 25,100) appears to be a temporary peak, as forecasts based on historical patterns suggest a correction to levels of approximately 22,384 in the short term.

The high tail risk (leptokurtosis) should be considered, as there is a greater probability of extreme movements, which could mean a steeper-than-expected drop if the market reacts to less favorable financial results.

Fundamentally, the company is solid and operates in a critical sector (energy transmission) with a low-regulatory-risk business model. This is not the ideal time to invest if the goal is to obtain an immediate profit above the current price. For a short-term investor, investing now is not recommended. It would be prudent to wait for a correction toward the area projected by the trend models (approximately 22,000 to 23,000) to enter with a better margin of safety.

For a long-term investor, the fundamental analysis remains strong. A staggered entry can be considered, taking advantage of any price drops that occur as part of the projected correction.