Correlation Between Bank of Nova Scotia and IA Financial
Can any of the company-specific risk be diversified away by investing in both Bank of Nova Scotia and IA 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 IA 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 iA Financial, you can compare the effects of market volatilities on Bank of Nova Scotia and IA 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 IA Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Nova Scotia and IA Financial.
Diversification Opportunities for Bank of Nova Scotia and IA Financial
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Bank and IAG is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Nova and iA Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iA Financial 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 IA Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iA Financial has no effect on the direction of Bank of Nova Scotia i.e., Bank of Nova Scotia and IA Financial go up and down completely randomly.
Pair Corralation between Bank of Nova Scotia and IA Financial
Assuming the 90 days trading horizon Bank of Nova Scotia is expected to generate 2.15 times less return on investment than IA Financial. But when comparing it to its historical volatility, Bank of Nova is 3.6 times less risky than IA Financial. It trades about 0.28 of its potential returns per unit of risk. iA Financial is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 11,135 in iA Financial on August 29, 2024 and sell it today you would earn a total of 2,093 from holding iA Financial or generate 18.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of Nova vs. iA Financial
Performance |
| Timeline |
| Bank of Nova Scotia |
| iA Financial |
Bank of Nova Scotia and IA Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Nova Scotia and IA Financial
The main advantage of trading using opposite Bank of Nova Scotia and IA Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Nova Scotia position performs unexpectedly, IA 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 IA Financial will offset losses from the drop in IA Financial's long position.| Bank of Nova Scotia vs. Microsoft Corp CDR | Bank of Nova Scotia vs. Apple Inc CDR | Bank of Nova Scotia vs. Alphabet Inc CDR | Bank of Nova Scotia vs. Amazon CDR |
| IA Financial vs. Great West Lifeco | IA Financial vs. Intact Financial | IA Financial vs. IGM Financial | IA Financial vs. Sun Life Financial |
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 Stocks Directory module to find actively traded stocks across global markets.
Other Complementary Tools
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Transaction History View history of all your transactions and understand their impact on performance |