Correlation Between Bank of Nova Scotia and Methode Electronics

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

Diversification Opportunities for Bank of Nova Scotia and Methode Electronics

0.0

Correlation Coefficient

Bank of Nova Scotia  Methode Electronics

Pay attention - limited upside

The 3 months correlation between Bank and Methode is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding The Bank of and Methode Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methode Electronics 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 Methode Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Methode Electronics has no effect on the direction of Bank of Nova Scotia i.e., Bank of Nova Scotia and Methode Electronics go up and down completely randomly.

Pair Corralation between Bank of Nova Scotia and Methode Electronics

If you would invest  0.00  in The Bank of on December 20, 2024 and sell it today you would earn a total of  0.00  from holding The Bank of or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.69%
Values	Daily Returns

The Bank of  vs.  Methode Electronics

Bank of Nova Scotia

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Methode Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Methode Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Bank of Nova Scotia and Methode Electronics

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

The idea behind The Bank of and Methode Electronics 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..