Correlation Between Bank of Nova Scotia and HSBC Holdings
Can any of the company-specific risk be diversified away by investing in both Bank of Nova Scotia and HSBC Holdings 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 HSBC Holdings 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 HSBC Holdings PLC, you can compare the effects of market volatilities on Bank of Nova Scotia and HSBC Holdings 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 HSBC Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Nova Scotia and HSBC Holdings.
Diversification Opportunities for Bank of Nova Scotia and HSBC Holdings
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and HSBC is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Nova and HSBC Holdings PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC Holdings PLC 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 HSBC Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC Holdings PLC has no effect on the direction of Bank of Nova Scotia i.e., Bank of Nova Scotia and HSBC Holdings go up and down completely randomly.
Pair Corralation between Bank of Nova Scotia and HSBC Holdings
Considering the 90-day investment horizon Bank of Nova is expected to generate 0.75 times more return on investment than HSBC Holdings. However, Bank of Nova is 1.34 times less risky than HSBC Holdings. It trades about 0.4 of its potential returns per unit of risk. HSBC Holdings PLC is currently generating about 0.06 per unit of risk. If you would invest 5,222 in Bank of Nova on August 30, 2024 and sell it today you would earn a total of 450.00 from holding Bank of Nova or generate 8.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of Nova vs. HSBC Holdings PLC
Performance |
| Timeline |
| Bank of Nova Scotia |
| HSBC Holdings PLC |
Bank of Nova Scotia and HSBC Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Nova Scotia and HSBC Holdings
The main advantage of trading using opposite Bank of Nova Scotia and HSBC Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Nova Scotia position performs unexpectedly, HSBC Holdings 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 HSBC Holdings will offset losses from the drop in HSBC Holdings' long position.| Bank of Nova Scotia vs. Toronto Dominion Bank | Bank of Nova Scotia vs. Royal Bank of | Bank of Nova Scotia vs. Canadian Imperial Bank | Bank of Nova Scotia vs. JPMorgan Chase Co |
| HSBC Holdings vs. ING Group NV | HSBC Holdings vs. Natwest Group PLC | HSBC Holdings vs. Banco Santander SA | HSBC Holdings vs. UBS Group AG |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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