Correlation Between Bank of Nova Scotia and Microbix Biosystems

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

Diversification Opportunities for Bank of Nova Scotia and Microbix Biosystems

-0.68

Correlation Coefficient

Bank of Nova Scotia  Microbix Biosystems

Excellent diversification

The 3 months correlation between Bank and Microbix is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Nova and Microbix Biosystems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microbix Biosystems 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 Microbix Biosystems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microbix Biosystems has no effect on the direction of Bank of Nova Scotia i.e., Bank of Nova Scotia and Microbix Biosystems go up and down completely randomly.

Pair Corralation between Bank of Nova Scotia and Microbix Biosystems

Assuming the 90 days trading horizon Bank of Nova is expected to generate 0.35 times more return on investment than Microbix Biosystems. However, Bank of Nova is 2.83 times less risky than Microbix Biosystems. It trades about 0.26 of its potential returns per unit of risk. Microbix Biosystems is currently generating about 0.03 per unit of risk. If you would invest  6,923  in Bank of Nova on September 12, 2024 and sell it today you would earn a total of  993.00  from holding Bank of Nova or generate 14.34% return on investment over 90 days.

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

Bank of Nova  vs.  Microbix Biosystems

Bank of Nova Scotia

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Nova are ranked lower than 20 (%) 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.

Microbix Biosystems

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microbix Biosystems are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Microbix Biosystems is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Bank of Nova Scotia and Microbix Biosystems

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

The idea behind Bank of Nova and Microbix Biosystems 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.

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