Correlation Between Bank of Nova Scotia and United Parcel
Can any of the company-specific risk be diversified away by investing in both Bank of Nova Scotia and United Parcel 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 United Parcel 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 United Parcel Service, you can compare the effects of market volatilities on Bank of Nova Scotia and United Parcel 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 United Parcel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Nova Scotia and United Parcel.
Diversification Opportunities for Bank of Nova Scotia and United Parcel
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and United is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding The Bank of and United Parcel Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Parcel Service 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 United Parcel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Parcel Service has no effect on the direction of Bank of Nova Scotia i.e., Bank of Nova Scotia and United Parcel go up and down completely randomly.
Pair Corralation between Bank of Nova Scotia and United Parcel
Assuming the 90 days trading horizon The Bank of is expected to generate 2.86 times more return on investment than United Parcel. However, Bank of Nova Scotia is 2.86 times more volatile than United Parcel Service. It trades about 0.2 of its potential returns per unit of risk. United Parcel Service is currently generating about 0.16 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 Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Bank of vs. United Parcel Service
Performance |
| Timeline |
| Bank of Nova Scotia |
| United Parcel Service |
Bank of Nova Scotia and United Parcel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Nova Scotia and United Parcel
The main advantage of trading using opposite Bank of Nova Scotia and United Parcel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Nova Scotia position performs unexpectedly, United Parcel 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 United Parcel will offset losses from the drop in United Parcel'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 |
| United Parcel vs. Grupo Sports World | United Parcel vs. Hoteles City Express | United Parcel vs. Monster Beverage Corp | United Parcel vs. Grupo Hotelero Santa |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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