Correlation Between Bank of Nova Scotia and Big Rock
Can any of the company-specific risk be diversified away by investing in both Bank of Nova Scotia and Big Rock 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 Big Rock 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 Big Rock Brewery, you can compare the effects of market volatilities on Bank of Nova Scotia and Big Rock 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 Big Rock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Nova Scotia and Big Rock.
Diversification Opportunities for Bank of Nova Scotia and Big Rock
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and Big is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Nova and Big Rock Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Rock Brewery 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 Big Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Rock Brewery has no effect on the direction of Bank of Nova Scotia i.e., Bank of Nova Scotia and Big Rock go up and down completely randomly.
Pair Corralation between Bank of Nova Scotia and Big Rock
Assuming the 90 days trading horizon Bank of Nova is expected to generate 0.16 times more return on investment than Big Rock. However, Bank of Nova is 6.14 times less risky than Big Rock. It trades about -0.15 of its potential returns per unit of risk. Big Rock Brewery is currently generating about -0.09 per unit of risk. If you would invest 7,602 in Bank of Nova on October 24, 2024 and sell it today you would lose (168.00) from holding Bank of Nova or give up 2.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of Nova vs. Big Rock Brewery
Performance |
| Timeline |
| Bank of Nova Scotia |
| Big Rock Brewery |
Bank of Nova Scotia and Big Rock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Nova Scotia and Big Rock
The main advantage of trading using opposite Bank of Nova Scotia and Big Rock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Nova Scotia position performs unexpectedly, Big Rock 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 Big Rock will offset losses from the drop in Big Rock'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 |
| Big Rock vs. Corby Spirit and | Big Rock vs. Gamehost | Big Rock vs. Andrew Peller Limited | Big Rock vs. Buhler Industries |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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