Correlation Between Bank of Nova Scotia and Financial
Can any of the company-specific risk be diversified away by investing in both Bank of Nova Scotia and Financial 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 Financial 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 Financial 15 Split, you can compare the effects of market volatilities on Bank of Nova Scotia and Financial 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 Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Nova Scotia and Financial.
Diversification Opportunities for Bank of Nova Scotia and Financial
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and Financial is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Nova and Financial 15 Split in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial 15 Split 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 Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial 15 Split has no effect on the direction of Bank of Nova Scotia i.e., Bank of Nova Scotia and Financial go up and down completely randomly.
Pair Corralation between Bank of Nova Scotia and Financial
Assuming the 90 days trading horizon Bank of Nova is expected to generate 3.94 times more return on investment than Financial. However, Bank of Nova Scotia is 3.94 times more volatile than Financial 15 Split. It trades about 0.11 of its potential returns per unit of risk. Financial 15 Split is currently generating about 0.26 per unit of risk. If you would invest 5,883 in Bank of Nova on November 3, 2024 and sell it today you would earn a total of 1,553 from holding Bank of Nova or generate 26.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of Nova vs. Financial 15 Split
Performance |
| Timeline |
| Bank of Nova Scotia |
| Financial 15 Split |
Bank of Nova Scotia and Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Nova Scotia and Financial
The main advantage of trading using opposite Bank of Nova Scotia and Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Nova Scotia position performs unexpectedly, Financial 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 Financial will offset losses from the drop in Financial'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 |
| Financial vs. North American Financial | Financial vs. Dividend 15 Split | Financial vs. Dividend Growth Split | Financial vs. Dividend 15 Split |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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