Correlation Between Financial and Bank of Nova Scotia
Can any of the company-specific risk be diversified away by investing in both 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 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 Financial 15 Split and Bank of Nova, you can compare the effects of market volatilities on 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 Financial with a short position of Bank of Nova Scotia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial and Bank of Nova Scotia.
Diversification Opportunities for Financial and Bank of Nova Scotia
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Financial and Bank is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split 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 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 Financial 15 Split 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 Financial i.e., Financial and Bank of Nova Scotia go up and down completely randomly.
Pair Corralation between Financial and Bank of Nova Scotia
Assuming the 90 days trading horizon Financial 15 Split is expected to generate 1.72 times more return on investment than Bank of Nova Scotia. However, Financial is 1.72 times more volatile than Bank of Nova. It trades about 0.07 of its potential returns per unit of risk. Bank of Nova is currently generating about 0.11 per unit of risk. If you would invest 676.00 in Financial 15 Split on September 12, 2024 and sell it today you would earn a total of 307.00 from holding Financial 15 Split or generate 45.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Financial 15 Split vs. Bank of Nova
Performance |
| Timeline |
| Financial 15 Split |
| Bank of Nova Scotia |
Financial and Bank of Nova Scotia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial and Bank of Nova Scotia
The main advantage of trading using opposite Financial and Bank of Nova Scotia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 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.| Financial vs. Dividend 15 Split | Financial vs. Dividend Growth Split | Financial vs. North American Financial | Financial vs. Life Banc Split |
| Bank of Nova Scotia vs. Brompton Lifeco Split | Bank of Nova Scotia vs. North American Financial | Bank of Nova Scotia vs. Prime Dividend Corp | Bank of Nova Scotia vs. Financial 15 Split |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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