Correlation Between Definity Financial and Bank of Nova Scotia
Can any of the company-specific risk be diversified away by investing in both Definity Financial and Bank of Nova Scotia 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 Definity Financial and Bank of Nova Scotia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Definity Financial Corp and Bank of Nova, you can compare the effects of market volatilities on Definity Financial and Bank of Nova Scotia 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 Definity Financial with a short position of Bank of Nova Scotia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Definity Financial and Bank of Nova Scotia.
Diversification Opportunities for Definity Financial and Bank of Nova Scotia
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Definity and Bank is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Definity Financial Corp and Bank of Nova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Nova Scotia and Definity Financial 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 Definity Financial Corp are associated (or correlated) with Bank of Nova Scotia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Nova Scotia has no effect on the direction of Definity Financial i.e., Definity Financial and Bank of Nova Scotia go up and down completely randomly.
Pair Corralation between Definity Financial and Bank of Nova Scotia
Assuming the 90 days trading horizon Definity Financial Corp is expected to generate 1.34 times more return on investment than Bank of Nova Scotia. However, Definity Financial is 1.34 times more volatile than Bank of Nova. It trades about 0.08 of its potential returns per unit of risk. Bank of Nova is currently generating about 0.06 per unit of risk. If you would invest 3,622 in Definity Financial Corp on August 31, 2024 and sell it today you would earn a total of 2,244 from holding Definity Financial Corp or generate 61.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Definity Financial Corp vs. Bank of Nova
Performance |
| Timeline |
| Definity Financial Corp |
| Bank of Nova Scotia |
Definity Financial and Bank of Nova Scotia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Definity Financial and Bank of Nova Scotia
The main advantage of trading using opposite Definity Financial and Bank of Nova Scotia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Definity Financial position performs unexpectedly, Bank of Nova Scotia 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 Bank of Nova Scotia will offset losses from the drop in Bank of Nova Scotia's long position.| Definity Financial vs. iShares Canadian HYBrid | Definity Financial vs. Brompton European Dividend | Definity Financial vs. Solar Alliance Energy | Definity Financial vs. PHN Multi Style All Cap |
| 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 |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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