Correlation Between Bank of Nova Scotia and Sun Life
Can any of the company-specific risk be diversified away by investing in both Bank of Nova Scotia and Sun Life 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 Sun Life 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 Sun Life Financial, you can compare the effects of market volatilities on Bank of Nova Scotia and Sun Life 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 Sun Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Nova Scotia and Sun Life.
Diversification Opportunities for Bank of Nova Scotia and Sun Life
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Bank and Sun is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Nova and Sun Life Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Life 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 Sun Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Life Financial has no effect on the direction of Bank of Nova Scotia i.e., Bank of Nova Scotia and Sun Life go up and down completely randomly.
Pair Corralation between Bank of Nova Scotia and Sun Life
Assuming the 90 days trading horizon Bank of Nova is expected to generate 0.95 times more return on investment than Sun Life. However, Bank of Nova is 1.05 times less risky than Sun Life. It trades about 0.07 of its potential returns per unit of risk. Sun Life Financial is currently generating about 0.05 per unit of risk. If you would invest 5,860 in Bank of Nova on September 4, 2024 and sell it today you would earn a total of 2,119 from holding Bank of Nova or generate 36.16% 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. Sun Life Financial
Performance |
| Timeline |
| Bank of Nova Scotia |
| Sun Life Financial |
Bank of Nova Scotia and Sun Life Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Nova Scotia and Sun Life
The main advantage of trading using opposite Bank of Nova Scotia and Sun Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Nova Scotia position performs unexpectedly, Sun Life 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 Sun Life will offset losses from the drop in Sun Life'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 |
| Sun Life vs. MAG Silver Corp | Sun Life vs. Millennium Silver Corp | Sun Life vs. Earth Alive Clean | Sun Life vs. Monument Mining Limited |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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