Correlation Between Bank of Nova Scotia and BGF World

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

Diversification Opportunities for Bank of Nova Scotia and BGF World

-0.59

Correlation Coefficient

Bank of Nova Scotia  BGF World

Excellent diversification

The 3 months correlation between Bank and BGF is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding The Bank of and BGF World Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BGF World Gold 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 BGF World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BGF World Gold has no effect on the direction of Bank of Nova Scotia i.e., Bank of Nova Scotia and BGF World go up and down completely randomly.

Pair Corralation between Bank of Nova Scotia and BGF World

Assuming the 90 days horizon The Bank of is expected to under-perform the BGF World. But the stock apears to be less risky and, when comparing its historical volatility, The Bank of is 1.77 times less risky than BGF World. The stock trades about -0.02 of its potential returns per unit of risk. The BGF World Gold is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  3,757  in BGF World Gold on October 22, 2024 and sell it today you would earn a total of  220.00  from holding BGF World Gold or generate 5.86% return on investment over 90 days.

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

The Bank of  vs.  BGF World Gold

Bank of Nova Scotia

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Bank of are ranked lower than 5 (%) 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.

BGF World Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BGF World Gold has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest unsteady performance, the Fund's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with Bank of Nova Scotia and BGF World

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

The idea behind The Bank of and BGF World Gold 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.