Correlation Between Bank of Nova Scotia and RepliCel Life

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

Diversification Opportunities for Bank of Nova Scotia and RepliCel Life

-0.81

Correlation Coefficient

Bank of Nova Scotia  RepliCel Life

Pay attention - limited upside

The 3 months correlation between Bank and RepliCel is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Nova and RepliCel Life Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RepliCel Life Sciences 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 RepliCel Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RepliCel Life Sciences has no effect on the direction of Bank of Nova Scotia i.e., Bank of Nova Scotia and RepliCel Life go up and down completely randomly.

Pair Corralation between Bank of Nova Scotia and RepliCel Life

Assuming the 90 days trading horizon Bank of Nova is expected to generate 0.04 times more return on investment than RepliCel Life. However, Bank of Nova is 25.4 times less risky than RepliCel Life. It trades about 0.19 of its potential returns per unit of risk. RepliCel Life Sciences is currently generating about -0.04 per unit of risk. If you would invest  7,097  in Bank of Nova on September 19, 2024 and sell it today you would earn a total of  740.00  from holding Bank of Nova or generate 10.43% return on investment over 90 days.

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

Bank of Nova  vs.  RepliCel Life Sciences

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.

RepliCel Life Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RepliCel Life Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Bank of Nova Scotia and RepliCel Life

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

The idea behind Bank of Nova and RepliCel Life Sciences 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.