Correlation Between Bank of Nova Scotia and SAP SE
Can any of the company-specific risk be diversified away by investing in both Bank of Nova Scotia and SAP SE 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 SAP SE 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 SAP SE, you can compare the effects of market volatilities on Bank of Nova Scotia and SAP SE 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 SAP SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Nova Scotia and SAP SE.
Diversification Opportunities for Bank of Nova Scotia and SAP SE
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and SAP is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding The Bank of and SAP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE 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 SAP SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAP SE has no effect on the direction of Bank of Nova Scotia i.e., Bank of Nova Scotia and SAP SE go up and down completely randomly.
Pair Corralation between Bank of Nova Scotia and SAP SE
Assuming the 90 days trading horizon The Bank of is expected to under-perform the SAP SE. But the stock apears to be less risky and, when comparing its historical volatility, The Bank of is 1.3 times less risky than SAP SE. The stock trades about -0.34 of its potential returns per unit of risk. The SAP SE is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 479,440 in SAP SE on October 7, 2024 and sell it today you would earn a total of 20,560 from holding SAP SE or generate 4.29% 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. SAP SE
Performance |
| Timeline |
| Bank of Nova Scotia |
| SAP SE |
Bank of Nova Scotia and SAP SE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Nova Scotia and SAP SE
The main advantage of trading using opposite Bank of Nova Scotia and SAP SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Nova Scotia position performs unexpectedly, SAP SE 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 SAP SE will offset losses from the drop in SAP SE's long position.The idea behind The Bank of and SAP SE pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| SAP SE vs. Adobe Inc | SAP SE vs. The Select Sector | SAP SE vs. Promotora y Operadora | SAP SE vs. iShares Global Timber |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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