Correlation Between Bank of Nova Scotia and Financial

Can any of the company-specific risk be diversified away by investing in both Bank of Nova Scotia and Financial 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 Financial 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 Financial 15 Split, you can compare the effects of market volatilities on Bank of Nova Scotia and Financial 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 Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Nova Scotia and Financial.

Diversification Opportunities for Bank of Nova Scotia and Financial

0.91

Correlation Coefficient

Bank of Nova Scotia  Financial

Almost no diversification

The 3 months correlation between Bank and Financial is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Nova and Financial 15 Split in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial 15 Split 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 Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial 15 Split has no effect on the direction of Bank of Nova Scotia i.e., Bank of Nova Scotia and Financial go up and down completely randomly.

Pair Corralation between Bank of Nova Scotia and Financial

Assuming the 90 days trading horizon Bank of Nova is expected to under-perform the Financial. In addition to that, Bank of Nova Scotia is 4.33 times more volatile than Financial 15 Split. It trades about -0.11 of its total potential returns per unit of risk. Financial 15 Split is currently generating about 0.25 per unit of volatility. If you would invest  1,057  in Financial 15 Split on September 23, 2024 and sell it today you would earn a total of  12.00  from holding Financial 15 Split or generate 1.14% return on investment over 90 days.

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

Bank of Nova  vs.  Financial 15 Split

Bank of Nova Scotia

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Nova are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Bank of Nova Scotia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Financial 15 Split

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Financial 15 Split are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bank of Nova Scotia and Financial

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

The idea behind Bank of Nova and Financial 15 Split 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.