Correlation Between Bank of Nova Scotia and Mastercard Incorporated
Can any of the company-specific risk be diversified away by investing in both Bank of Nova Scotia and Mastercard Incorporated 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 Mastercard Incorporated 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 Mastercard Incorporated, you can compare the effects of market volatilities on Bank of Nova Scotia and Mastercard Incorporated 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 Mastercard Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Nova Scotia and Mastercard Incorporated.
Diversification Opportunities for Bank of Nova Scotia and Mastercard Incorporated
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Mastercard is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding The Bank of and Mastercard Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastercard Incorporated 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 Mastercard Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mastercard Incorporated has no effect on the direction of Bank of Nova Scotia i.e., Bank of Nova Scotia and Mastercard Incorporated go up and down completely randomly.
Pair Corralation between Bank of Nova Scotia and Mastercard Incorporated
Assuming the 90 days trading horizon The Bank of is expected to generate 1.05 times more return on investment than Mastercard Incorporated. However, Bank of Nova Scotia is 1.05 times more volatile than Mastercard Incorporated. It trades about 0.13 of its potential returns per unit of risk. Mastercard Incorporated is currently generating about 0.13 per unit of risk. If you would invest 72,085 in The Bank of on September 14, 2024 and sell it today you would earn a total of 40,415 from holding The Bank of or generate 56.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Bank of vs. Mastercard Incorporated
Performance |
| Timeline |
| Bank of Nova Scotia |
| Mastercard Incorporated |
Bank of Nova Scotia and Mastercard Incorporated Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Nova Scotia and Mastercard Incorporated
The main advantage of trading using opposite Bank of Nova Scotia and Mastercard Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Nova Scotia position performs unexpectedly, Mastercard Incorporated 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 Mastercard Incorporated will offset losses from the drop in Mastercard Incorporated's long position.| Bank of Nova Scotia vs. Verizon Communications | Bank of Nova Scotia vs. New Oriental Education | Bank of Nova Scotia vs. McEwen Mining | Bank of Nova Scotia vs. Grupo Sports World |
| Mastercard Incorporated vs. GMxico Transportes SAB | Mastercard Incorporated vs. McEwen Mining | Mastercard Incorporated vs. Verizon Communications | Mastercard Incorporated vs. Lloyds Banking Group |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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