Correlation Between Bank of Nova Scotia and Microsoft
Can any of the company-specific risk be diversified away by investing in both Bank of Nova Scotia and Microsoft 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 Microsoft 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 Microsoft, you can compare the effects of market volatilities on Bank of Nova Scotia and Microsoft 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 Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Nova Scotia and Microsoft.
Diversification Opportunities for Bank of Nova Scotia and Microsoft
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Microsoft is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding The Bank of and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Bank of Nova Scotia i.e., Bank of Nova Scotia and Microsoft go up and down completely randomly.
Pair Corralation between Bank of Nova Scotia and Microsoft
Assuming the 90 days trading horizon The Bank of is expected to generate 2.2 times more return on investment than Microsoft. However, Bank of Nova Scotia is 2.2 times more volatile than Microsoft. It trades about 0.12 of its potential returns per unit of risk. Microsoft is currently generating about 0.21 per unit of risk. If you would invest 101,800 in The Bank of on September 20, 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 Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Bank of vs. Microsoft
Performance |
| Timeline |
| Bank of Nova Scotia |
| Microsoft |
Bank of Nova Scotia and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Nova Scotia and Microsoft
The main advantage of trading using opposite Bank of Nova Scotia and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Nova Scotia position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.| Bank of Nova Scotia vs. Samsung Electronics Co | Bank of Nova Scotia vs. Costco Wholesale | Bank of Nova Scotia vs. DXC Technology | Bank of Nova Scotia vs. Capital One Financial |
| Microsoft vs. The Bank of | Microsoft vs. Monster Beverage Corp | Microsoft vs. UnitedHealth Group Incorporated | Microsoft vs. New Oriental Education |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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