Correlation Between Bank of Nova Scotia and Avalon Advanced
Can any of the company-specific risk be diversified away by investing in both Bank of Nova Scotia and Avalon Advanced 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 Avalon Advanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of Nova and Avalon Advanced Materials, you can compare the effects of market volatilities on Bank of Nova Scotia and Avalon Advanced 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 Avalon Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Nova Scotia and Avalon Advanced.
Diversification Opportunities for Bank of Nova Scotia and Avalon Advanced
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Bank and Avalon is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Nova and Avalon Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avalon Advanced Materials 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 Bank of Nova are associated (or correlated) with Avalon Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avalon Advanced Materials has no effect on the direction of Bank of Nova Scotia i.e., Bank of Nova Scotia and Avalon Advanced go up and down completely randomly.
Pair Corralation between Bank of Nova Scotia and Avalon Advanced
Assuming the 90 days trading horizon Bank of Nova is expected to generate 0.07 times more return on investment than Avalon Advanced. However, Bank of Nova is 15.22 times less risky than Avalon Advanced. It trades about 0.58 of its potential returns per unit of risk. Avalon Advanced Materials is currently generating about -0.04 per unit of risk. If you would invest 7,266 in Bank of Nova on August 31, 2024 and sell it today you would earn a total of 714.00 from holding Bank of Nova or generate 9.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of Nova vs. Avalon Advanced Materials
Performance |
| Timeline |
| Bank of Nova Scotia |
| Avalon Advanced Materials |
Bank of Nova Scotia and Avalon Advanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Nova Scotia and Avalon Advanced
The main advantage of trading using opposite Bank of Nova Scotia and Avalon Advanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Nova Scotia position performs unexpectedly, Avalon Advanced 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 Avalon Advanced will offset losses from the drop in Avalon Advanced's long position.| Bank of Nova Scotia vs. iShares Canadian HYBrid | Bank of Nova Scotia vs. Brompton European Dividend | Bank of Nova Scotia vs. Solar Alliance Energy | Bank of Nova Scotia vs. PHN Multi Style All Cap |
| Avalon Advanced vs. Solar Alliance Energy | Avalon Advanced vs. Global X Active | Avalon Advanced vs. Financial 15 Split | Avalon Advanced vs. Rubicon Organics |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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