Correlation Between IGM Financial and Bank of Nova Scotia
Can any of the company-specific risk be diversified away by investing in both IGM 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 IGM 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 IGM Financial and Bank of Nova, you can compare the effects of market volatilities on IGM 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 IGM Financial with a short position of Bank of Nova Scotia. Check out your portfolio center. Please also check ongoing floating volatility patterns of IGM Financial and Bank of Nova Scotia.
Diversification Opportunities for IGM Financial and Bank of Nova Scotia
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IGM and Bank is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding IGM Financial 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 IGM 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 IGM Financial 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 IGM Financial i.e., IGM Financial and Bank of Nova Scotia go up and down completely randomly.
Pair Corralation between IGM Financial and Bank of Nova Scotia
Assuming the 90 days trading horizon IGM Financial is expected to generate 1.22 times more return on investment than Bank of Nova Scotia. However, IGM Financial is 1.22 times more volatile than Bank of Nova. It trades about 0.12 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 3,444 in IGM Financial on November 3, 2024 and sell it today you would earn a total of 1,219 from holding IGM Financial or generate 35.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.6% |
| Values | Daily Returns |
IGM Financial vs. Bank of Nova
Performance |
| Timeline |
| IGM Financial |
| Bank of Nova Scotia |
IGM Financial and Bank of Nova Scotia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IGM Financial and Bank of Nova Scotia
The main advantage of trading using opposite IGM Financial and Bank of Nova Scotia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IGM 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.| IGM Financial vs. CI Financial Corp | IGM Financial vs. Great West Lifeco | IGM Financial vs. iA Financial | IGM Financial vs. Power |
| 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
Other Complementary Tools
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Fundamental Analysis View fundamental data based on most recent published financial statements |