Correlation Between Bank of Nova Scotia and Axe2 Acquisitions

Can any of the company-specific risk be diversified away by investing in both Bank of Nova Scotia and Axe2 Acquisitions 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 Bank of Nova Scotia and Axe2 Acquisitions into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bank of Nova and Axe2 Acquisitions, you can compare the effects of market volatilities on Bank of Nova Scotia and Axe2 Acquisitions 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 Bank of Nova Scotia with a short position of Axe2 Acquisitions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Nova Scotia and Axe2 Acquisitions.

Diversification Opportunities for Bank of Nova Scotia and Axe2 Acquisitions

-0.7

Correlation Coefficient

Bank of Nova Scotia  Axe2 Acquisitions

Excellent diversification

The 3 months correlation between Bank and Axe2 is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Nova and Axe2 Acquisitions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axe2 Acquisitions and Bank of Nova Scotia 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 Bank of Nova are associated (or correlated) with Axe2 Acquisitions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axe2 Acquisitions has no effect on the direction of Bank of Nova Scotia i.e., Bank of Nova Scotia and Axe2 Acquisitions go up and down completely randomly.

Pair Corralation between Bank of Nova Scotia and Axe2 Acquisitions

Assuming the 90 days trading horizon Bank of Nova is expected to generate 0.52 times more return on investment than Axe2 Acquisitions. However, Bank of Nova is 1.91 times less risky than Axe2 Acquisitions. It trades about 0.39 of its potential returns per unit of risk. Axe2 Acquisitions is currently generating about -0.13 per unit of risk. If you would invest  6,630  in Bank of Nova on August 30, 2024 and sell it today you would earn a total of  1,322  from holding Bank of Nova or generate 19.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Bank of Nova  vs.  Axe2 Acquisitions

Bank of Nova Scotia

Risk-Adjusted Performance

31 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Nova are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Bank of Nova Scotia displayed solid returns over the last few months and may actually be approaching a breakup point.

Axe2 Acquisitions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Axe2 Acquisitions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Bank of Nova Scotia and Axe2 Acquisitions

The main advantage of trading using opposite Bank of Nova Scotia and Axe2 Acquisitions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Nova Scotia position performs unexpectedly, Axe2 Acquisitions 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 Axe2 Acquisitions will offset losses from the drop in Axe2 Acquisitions' long position.

The idea behind Bank of Nova and Axe2 Acquisitions 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.