Correlation Between Bank of Nova Scotia and FF Global

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

By analyzing existing cross correlation between The Bank of and FF Global, you can compare the effects of market volatilities on Bank of Nova Scotia and FF Global 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 FF Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Nova Scotia and FF Global.

Diversification Opportunities for Bank of Nova Scotia and FF Global

0.72

Correlation Coefficient

Bank of Nova Scotia  FF Global

Poor diversification

The 3 months correlation between Bank and FJ2P is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding The Bank of and FF Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FF Global 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 The Bank of are associated (or correlated) with FF Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FF Global has no effect on the direction of Bank of Nova Scotia i.e., Bank of Nova Scotia and FF Global go up and down completely randomly.

Pair Corralation between Bank of Nova Scotia and FF Global

Assuming the 90 days horizon The Bank of is expected to generate 0.89 times more return on investment than FF Global. However, The Bank of is 1.12 times less risky than FF Global. It trades about 0.09 of its potential returns per unit of risk. FF Global is currently generating about 0.06 per unit of risk. If you would invest  3,599  in The Bank of on October 21, 2024 and sell it today you would earn a total of  1,374  from holding The Bank of or generate 38.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	79.31%
Values	Daily Returns

The Bank of  vs.  FF Global

Bank of Nova Scotia

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Bank of are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Bank of Nova Scotia is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

FF Global

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FF Global are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound technical and fundamental indicators, FF Global is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Bank of Nova Scotia and FF Global

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

The idea behind The Bank of and FF Global 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.