Correlation Between Bank of Nova Scotia and Talon Metals
Can any of the company-specific risk be diversified away by investing in both Bank of Nova Scotia and Talon Metals 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 Talon Metals 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 Talon Metals Corp, you can compare the effects of market volatilities on Bank of Nova Scotia and Talon Metals 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 Talon Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Nova Scotia and Talon Metals.
Diversification Opportunities for Bank of Nova Scotia and Talon Metals
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and Talon is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Nova and Talon Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talon Metals Corp 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 Talon Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talon Metals Corp has no effect on the direction of Bank of Nova Scotia i.e., Bank of Nova Scotia and Talon Metals go up and down completely randomly.
Pair Corralation between Bank of Nova Scotia and Talon Metals
Assuming the 90 days trading horizon Bank of Nova is expected to generate 0.24 times more return on investment than Talon Metals. However, Bank of Nova is 4.1 times less risky than Talon Metals. It trades about 0.06 of its potential returns per unit of risk. Talon Metals Corp is currently generating about -0.06 per unit of risk. If you would invest 5,950 in Bank of Nova on September 3, 2024 and sell it today you would earn a total of 2,035 from holding Bank of Nova or generate 34.2% 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. Talon Metals Corp
Performance |
| Timeline |
| Bank of Nova Scotia |
| Talon Metals Corp |
Bank of Nova Scotia and Talon Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Nova Scotia and Talon Metals
The main advantage of trading using opposite Bank of Nova Scotia and Talon Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Nova Scotia position performs unexpectedly, Talon Metals 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 Talon Metals will offset losses from the drop in Talon Metals' 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 |
| Talon Metals vs. Algoma Steel Group | Talon Metals vs. Champion Iron | Talon Metals vs. International Zeolite Corp | Talon Metals vs. European Residential Real |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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