Correlation Between Bank of Nova Scotia and Westport Fuel
Can any of the company-specific risk be diversified away by investing in both Bank of Nova Scotia and Westport Fuel 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 Westport Fuel 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 Westport Fuel Systems, you can compare the effects of market volatilities on Bank of Nova Scotia and Westport Fuel 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 Westport Fuel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Nova Scotia and Westport Fuel.
Diversification Opportunities for Bank of Nova Scotia and Westport Fuel
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Bank and Westport is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Nova and Westport Fuel Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westport Fuel Systems 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 Westport Fuel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westport Fuel Systems has no effect on the direction of Bank of Nova Scotia i.e., Bank of Nova Scotia and Westport Fuel go up and down completely randomly.
Pair Corralation between Bank of Nova Scotia and Westport Fuel
Assuming the 90 days trading horizon Bank of Nova is expected to generate 0.27 times more return on investment than Westport Fuel. However, Bank of Nova is 3.7 times less risky than Westport Fuel. It trades about 0.07 of its potential returns per unit of risk. Westport Fuel Systems is currently generating about -0.01 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 | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of Nova vs. Westport Fuel Systems
Performance |
| Timeline |
| Bank of Nova Scotia |
| Westport Fuel Systems |
Bank of Nova Scotia and Westport Fuel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Nova Scotia and Westport Fuel
The main advantage of trading using opposite Bank of Nova Scotia and Westport Fuel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Nova Scotia position performs unexpectedly, Westport Fuel 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 Westport Fuel will offset losses from the drop in Westport Fuel'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 |
| Westport Fuel vs. Ballard Power Systems | Westport Fuel vs. NFI Group | Westport Fuel vs. GreenPower Motor | Westport Fuel vs. Real Matters |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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