Correlation Between Bank of Nova Scotia and Sumitomo Mitsui

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

Diversification Opportunities for Bank of Nova Scotia and Sumitomo Mitsui

0.8

Correlation Coefficient

Bank of Nova Scotia  Sumitomo Mitsui

Very poor diversification

The 3 months correlation between Bank and Sumitomo is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Nova and Sumitomo Mitsui Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Mitsui Financial 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 Sumitomo Mitsui. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Mitsui Financial has no effect on the direction of Bank of Nova Scotia i.e., Bank of Nova Scotia and Sumitomo Mitsui go up and down completely randomly.

Pair Corralation between Bank of Nova Scotia and Sumitomo Mitsui

Considering the 90-day investment horizon Bank of Nova Scotia is expected to generate 106.1 times less return on investment than Sumitomo Mitsui. But when comparing it to its historical volatility, Bank of Nova is 2.06 times less risky than Sumitomo Mitsui. It trades about 0.0 of its potential returns per unit of risk. Sumitomo Mitsui Financial is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,193  in Sumitomo Mitsui Financial on September 27, 2024 and sell it today you would earn a total of  238.00  from holding Sumitomo Mitsui Financial or generate 19.95% return on investment over 90 days.

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

Bank of Nova  vs.  Sumitomo Mitsui Financial

Bank of Nova Scotia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank of Nova has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Bank of Nova Scotia is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Sumitomo Mitsui Financial

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Mitsui Financial are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Sumitomo Mitsui reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of Nova Scotia and Sumitomo Mitsui

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

The idea behind Bank of Nova and Sumitomo Mitsui Financial 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.