Correlation Between Bank of Nova Scotia and Brookfield Infrastructure
Can any of the company-specific risk be diversified away by investing in both Bank of Nova Scotia and Brookfield Infrastructure 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 Brookfield Infrastructure 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 Brookfield Infrastructure Partners, you can compare the effects of market volatilities on Bank of Nova Scotia and Brookfield Infrastructure 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 Brookfield Infrastructure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Nova Scotia and Brookfield Infrastructure.
Diversification Opportunities for Bank of Nova Scotia and Brookfield Infrastructure
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Brookfield is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Nova and Brookfield Infrastructure Part in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Infrastructure 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 Brookfield Infrastructure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Infrastructure has no effect on the direction of Bank of Nova Scotia i.e., Bank of Nova Scotia and Brookfield Infrastructure go up and down completely randomly.
Pair Corralation between Bank of Nova Scotia and Brookfield Infrastructure
Assuming the 90 days trading horizon Bank of Nova is expected to under-perform the Brookfield Infrastructure. In addition to that, Bank of Nova Scotia is 1.3 times more volatile than Brookfield Infrastructure Partners. It trades about -0.07 of its total potential returns per unit of risk. Brookfield Infrastructure Partners is currently generating about 0.05 per unit of volatility. If you would invest 2,495 in Brookfield Infrastructure Partners on September 20, 2024 and sell it today you would earn a total of 18.00 from holding Brookfield Infrastructure Partners or generate 0.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of Nova vs. Brookfield Infrastructure Part
Performance |
| Timeline |
| Bank of Nova Scotia |
| Brookfield Infrastructure |
Bank of Nova Scotia and Brookfield Infrastructure Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Nova Scotia and Brookfield Infrastructure
The main advantage of trading using opposite Bank of Nova Scotia and Brookfield Infrastructure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Nova Scotia position performs unexpectedly, Brookfield Infrastructure 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 Brookfield Infrastructure will offset losses from the drop in Brookfield Infrastructure's long position.| Bank of Nova Scotia vs. Toronto Dominion Bank | Bank of Nova Scotia vs. Royal Bank of | Bank of Nova Scotia vs. Bank of Montreal | Bank of Nova Scotia vs. Canadian Imperial Bank |
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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