Correlation Between Bank of Nova Scotia and BP Plc
Can any of the company-specific risk be diversified away by investing in both Bank of Nova Scotia and BP Plc 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 BP Plc 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 BP plc, you can compare the effects of market volatilities on Bank of Nova Scotia and BP Plc 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 BP Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Nova Scotia and BP Plc.
Diversification Opportunities for Bank of Nova Scotia and BP Plc
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and BPN is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding The Bank of and BP plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP plc 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 BP Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BP plc has no effect on the direction of Bank of Nova Scotia i.e., Bank of Nova Scotia and BP Plc go up and down completely randomly.
Pair Corralation between Bank of Nova Scotia and BP Plc
Assuming the 90 days trading horizon The Bank of is expected to generate 4.9 times more return on investment than BP Plc. However, Bank of Nova Scotia is 4.9 times more volatile than BP plc. It trades about 0.2 of its potential returns per unit of risk. BP plc is currently generating about 0.32 per unit of risk. If you would invest 101,800 in The Bank of on September 4, 2024 and sell it today you would earn a total of 14,000 from holding The Bank of or generate 13.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
The Bank of vs. BP plc
Performance |
| Timeline |
| Bank of Nova Scotia |
| BP plc |
Bank of Nova Scotia and BP Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Nova Scotia and BP Plc
The main advantage of trading using opposite Bank of Nova Scotia and BP Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Nova Scotia position performs unexpectedly, BP Plc 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 BP Plc will offset losses from the drop in BP Plc's long position.| Bank of Nova Scotia vs. Monster Beverage Corp | Bank of Nova Scotia vs. Cognizant Technology Solutions | Bank of Nova Scotia vs. DXC Technology | Bank of Nova Scotia vs. Taiwan Semiconductor Manufacturing |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
Other Complementary Tools
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities |