Correlation Between Bank of Nova Scotia and IShares Canadian
Can any of the company-specific risk be diversified away by investing in both Bank of Nova Scotia and IShares Canadian 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 IShares Canadian 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 iShares Canadian HYBrid, you can compare the effects of market volatilities on Bank of Nova Scotia and IShares Canadian 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 IShares Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Nova Scotia and IShares Canadian.
Diversification Opportunities for Bank of Nova Scotia and IShares Canadian
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and IShares is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Nova and iShares Canadian HYBrid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Canadian HYBrid 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 IShares Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Canadian HYBrid has no effect on the direction of Bank of Nova Scotia i.e., Bank of Nova Scotia and IShares Canadian go up and down completely randomly.
Pair Corralation between Bank of Nova Scotia and IShares Canadian
Assuming the 90 days trading horizon Bank of Nova is expected to generate 2.6 times more return on investment than IShares Canadian. However, Bank of Nova Scotia is 2.6 times more volatile than iShares Canadian HYBrid. It trades about 0.58 of its potential returns per unit of risk. iShares Canadian HYBrid is currently generating about 0.16 per unit of risk. If you would invest 7,266 in Bank of Nova on August 31, 2024 and sell it today you would earn a total of 714.00 from holding Bank of Nova or generate 9.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of Nova vs. iShares Canadian HYBrid
Performance |
| Timeline |
| Bank of Nova Scotia |
| iShares Canadian HYBrid |
Bank of Nova Scotia and IShares Canadian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Nova Scotia and IShares Canadian
The main advantage of trading using opposite Bank of Nova Scotia and IShares Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Nova Scotia position performs unexpectedly, IShares Canadian 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 IShares Canadian will offset losses from the drop in IShares Canadian's long position.| Bank of Nova Scotia vs. iShares Canadian HYBrid | Bank of Nova Scotia vs. Brompton European Dividend | Bank of Nova Scotia vs. Solar Alliance Energy | Bank of Nova Scotia vs. PHN Multi Style All Cap |
| IShares Canadian vs. iShares IG Corporate | IShares Canadian vs. iShares High Yield | IShares Canadian vs. iShares Floating Rate | IShares Canadian vs. iShares JP Morgan |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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