Correlation Between Intact Financial and Bank of Nova Scotia
Can any of the company-specific risk be diversified away by investing in both Intact 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 Intact 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 Intact Financial Corp and Bank of Nova, you can compare the effects of market volatilities on Intact 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 Intact Financial with a short position of Bank of Nova Scotia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intact Financial and Bank of Nova Scotia.
Diversification Opportunities for Intact Financial and Bank of Nova Scotia
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Intact and Bank is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Intact 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 Intact 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 Intact 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 Intact Financial i.e., Intact Financial and Bank of Nova Scotia go up and down completely randomly.
Pair Corralation between Intact Financial and Bank of Nova Scotia
Assuming the 90 days trading horizon Intact Financial Corp is expected to generate 0.86 times more return on investment than Bank of Nova Scotia. However, Intact Financial Corp is 1.16 times less risky than Bank of Nova Scotia. It trades about 0.06 of its potential returns per unit of risk. Bank of Nova is currently generating about 0.05 per unit of risk. If you would invest 1,919 in Intact Financial Corp on November 27, 2024 and sell it today you would earn a total of 547.00 from holding Intact Financial Corp or generate 28.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Intact Financial Corp vs. Bank of Nova
Performance |
| Timeline |
| Intact Financial Corp |
| Bank of Nova Scotia |
Intact Financial and Bank of Nova Scotia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Intact Financial and Bank of Nova Scotia
The main advantage of trading using opposite Intact Financial and Bank of Nova Scotia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intact 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.| Intact Financial vs. Intact Financial Corp | Intact Financial vs. National Bank of | Intact Financial vs. Fairfax Financial Holdings | Intact Financial vs. Fairfax Financial Holdings |
| 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 |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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