Correlation Between Apple and Bank of Nova Scotia

Can any of the company-specific risk be diversified away by investing in both Apple and Bank of Nova Scotia 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 Apple and Bank of Nova Scotia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Apple Inc CDR and Bank of Nova, you can compare the effects of market volatilities on Apple and Bank of Nova Scotia 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 Apple with a short position of Bank of Nova Scotia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Bank of Nova Scotia.

Diversification Opportunities for Apple and Bank of Nova Scotia

0.65

Correlation Coefficient

Apple  Bank of Nova Scotia

Poor diversification

The 3 months correlation between Apple and Bank is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc CDR and Bank of Nova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Nova Scotia and Apple 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 Apple Inc CDR are associated (or correlated) with Bank of Nova Scotia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Nova Scotia has no effect on the direction of Apple i.e., Apple and Bank of Nova Scotia go up and down completely randomly.

Pair Corralation between Apple and Bank of Nova Scotia

Assuming the 90 days trading horizon Apple Inc CDR is expected to generate 1.34 times more return on investment than Bank of Nova Scotia. However, Apple is 1.34 times more volatile than Bank of Nova. It trades about 0.1 of its potential returns per unit of risk. Bank of Nova is currently generating about 0.07 per unit of risk. If you would invest  1,935  in Apple Inc CDR on September 19, 2024 and sell it today you would earn a total of  1,697  from holding Apple Inc CDR or generate 87.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Apple Inc CDR  vs.  Bank of Nova

Apple Inc CDR

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc CDR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Apple may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with Apple and Bank of Nova Scotia

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

The idea behind Apple Inc CDR and Bank of Nova 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.