Correlation Between Bank of Nova Scotia and Hemostemix

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

Diversification Opportunities for Bank of Nova Scotia and Hemostemix

-0.34

Correlation Coefficient

Bank of Nova Scotia  Hemostemix

Very good diversification

The 3 months correlation between Bank and Hemostemix is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Nova and Hemostemix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hemostemix 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 Hemostemix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hemostemix has no effect on the direction of Bank of Nova Scotia i.e., Bank of Nova Scotia and Hemostemix go up and down completely randomly.

Pair Corralation between Bank of Nova Scotia and Hemostemix

Assuming the 90 days trading horizon Bank of Nova Scotia is expected to generate 1.99 times less return on investment than Hemostemix. But when comparing it to its historical volatility, Bank of Nova is 12.16 times less risky than Hemostemix. It trades about 0.19 of its potential returns per unit of risk. Hemostemix is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  8.50  in Hemostemix on September 19, 2024 and sell it today you would lose (1.00) from holding Hemostemix or give up 11.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Bank of Nova  vs.  Hemostemix

Bank of Nova Scotia

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Nova are ranked lower than 14 (%) 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.

Hemostemix

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hemostemix are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Hemostemix showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of Nova Scotia and Hemostemix

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

The idea behind Bank of Nova and Hemostemix 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.