Correlation Between Bank of Nova Scotia and Applied Materials
Can any of the company-specific risk be diversified away by investing in both Bank of Nova Scotia and Applied Materials 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 Bank of Nova Scotia and Applied Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Bank of and Applied Materials, you can compare the effects of market volatilities on Bank of Nova Scotia and Applied Materials 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 Bank of Nova Scotia with a short position of Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Nova Scotia and Applied Materials.
Diversification Opportunities for Bank of Nova Scotia and Applied Materials
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and Applied is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding The Bank of and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and Bank of Nova Scotia 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 The Bank of are associated (or correlated) with Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of Bank of Nova Scotia i.e., Bank of Nova Scotia and Applied Materials go up and down completely randomly.
Pair Corralation between Bank of Nova Scotia and Applied Materials
Assuming the 90 days trading horizon The Bank of is expected to generate 0.51 times more return on investment than Applied Materials. However, The Bank of is 1.96 times less risky than Applied Materials. It trades about 0.15 of its potential returns per unit of risk. Applied Materials is currently generating about 0.06 per unit of risk. If you would invest 72,085 in The Bank of on August 31, 2024 and sell it today you would earn a total of 44,115 from holding The Bank of or generate 61.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Bank of vs. Applied Materials
Performance |
| Timeline |
| Bank of Nova Scotia |
| Applied Materials |
Bank of Nova Scotia and Applied Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Nova Scotia and Applied Materials
The main advantage of trading using opposite Bank of Nova Scotia and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Nova Scotia position performs unexpectedly, Applied Materials 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 Applied Materials will offset losses from the drop in Applied Materials' long position.| Bank of Nova Scotia vs. CVS Health | Bank of Nova Scotia vs. Capital One Financial | Bank of Nova Scotia vs. Lloyds Banking Group | Bank of Nova Scotia vs. Monster Beverage Corp |
| Applied Materials vs. Micron Technology | Applied Materials vs. First Republic Bank | Applied Materials vs. Grupo Sports World | Applied Materials vs. Grupo Carso SAB |
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.
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