Correlation Between BlackRock and Bank of Nova Scotia

Can any of the company-specific risk be diversified away by investing in both BlackRock 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 BlackRock 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 BlackRock and The Bank of, you can compare the effects of market volatilities on BlackRock 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 BlackRock with a short position of Bank of Nova Scotia. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlackRock and Bank of Nova Scotia.

Diversification Opportunities for BlackRock and Bank of Nova Scotia

0.71

Correlation Coefficient

BlackRock  Bank of Nova Scotia

Poor diversification

The 3 months correlation between BlackRock and Bank is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock and The Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Nova Scotia and BlackRock 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 BlackRock 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 BlackRock i.e., BlackRock and Bank of Nova Scotia go up and down completely randomly.

Pair Corralation between BlackRock and Bank of Nova Scotia

Assuming the 90 days trading horizon BlackRock is expected to generate 1.21 times more return on investment than Bank of Nova Scotia. However, BlackRock is 1.21 times more volatile than The Bank of. It trades about 0.07 of its potential returns per unit of risk. The Bank of is currently generating about 0.05 per unit of risk. If you would invest  1,331,631  in BlackRock on September 27, 2024 and sell it today you would earn a total of  778,369  from holding BlackRock or generate 58.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

BlackRock  vs.  The Bank of

BlackRock

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking signals, BlackRock showed solid returns over the last few months and may actually be approaching a breakup point.

Bank of Nova Scotia

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Bank of are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Bank of Nova Scotia showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BlackRock and Bank of Nova Scotia

The main advantage of trading using opposite BlackRock and Bank of Nova Scotia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BlackRock 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.

The idea behind BlackRock and The Bank of pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.