Correlation Between AbbVie and Bank of Nova Scotia
Can any of the company-specific risk be diversified away by investing in both AbbVie and Bank of Nova Scotia 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 AbbVie and Bank of Nova Scotia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AbbVie Inc and The Bank of, you can compare the effects of market volatilities on AbbVie and Bank of Nova Scotia 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 AbbVie with a short position of Bank of Nova Scotia. Check out your portfolio center. Please also check ongoing floating volatility patterns of AbbVie and Bank of Nova Scotia.
Diversification Opportunities for AbbVie and Bank of Nova Scotia
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between AbbVie and Bank is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding AbbVie Inc and The Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Nova Scotia and AbbVie 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 AbbVie Inc are associated (or correlated) with Bank of Nova Scotia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Nova Scotia has no effect on the direction of AbbVie i.e., AbbVie and Bank of Nova Scotia go up and down completely randomly.
Pair Corralation between AbbVie and Bank of Nova Scotia
Assuming the 90 days trading horizon AbbVie Inc is expected to under-perform the Bank of Nova Scotia. But the stock apears to be less risky and, when comparing its historical volatility, AbbVie Inc is 2.05 times less risky than Bank of Nova Scotia. The stock trades about -0.1 of its potential returns per unit of risk. The The Bank of is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 101,800 in The Bank of on September 23, 2024 and sell it today you would earn a total of 8,200 from holding The Bank of or generate 8.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AbbVie Inc vs. The Bank of
Performance |
| Timeline |
| AbbVie Inc |
| Bank of Nova Scotia |
AbbVie and Bank of Nova Scotia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AbbVie and Bank of Nova Scotia
The main advantage of trading using opposite AbbVie and Bank of Nova Scotia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AbbVie position performs unexpectedly, Bank of Nova Scotia 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 Bank of Nova Scotia will offset losses from the drop in Bank of Nova Scotia's long position.| AbbVie vs. The Bank of | AbbVie vs. GMxico Transportes SAB | AbbVie vs. Grupo Sports World | AbbVie vs. First Republic Bank |
| Bank of Nova Scotia vs. Grupo Sports World | Bank of Nova Scotia vs. New Oriental Education | Bank of Nova Scotia vs. First Majestic Silver | Bank of Nova Scotia vs. CVS Health |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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