Correlation Between Bank of Nova Scotia and UBS Plc

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

Diversification Opportunities for Bank of Nova Scotia and UBS Plc

0.9

Correlation Coefficient

Bank of Nova Scotia  UBS Plc

Almost no diversification

The 3 months correlation between Bank and UBS is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding The Bank of and UBS plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS plc 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 UBS Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBS plc has no effect on the direction of Bank of Nova Scotia i.e., Bank of Nova Scotia and UBS Plc go up and down completely randomly.

Pair Corralation between Bank of Nova Scotia and UBS Plc

Assuming the 90 days horizon Bank of Nova Scotia is expected to generate 1.72 times less return on investment than UBS Plc. In addition to that, Bank of Nova Scotia is 1.65 times more volatile than UBS plc . It trades about 0.05 of its total potential returns per unit of risk. UBS plc is currently generating about 0.13 per unit of volatility. If you would invest  5,805  in UBS plc on October 4, 2024 and sell it today you would earn a total of  3,518  from holding UBS plc or generate 60.6% return on investment over 90 days.

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

The Bank of  vs.  UBS plc

Bank of Nova Scotia

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Bank of are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Bank of Nova Scotia may actually be approaching a critical reversion point that can send shares even higher in February 2025.

UBS plc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in UBS plc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, UBS Plc may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Bank of Nova Scotia and UBS Plc

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

The idea behind The Bank of and UBS plc 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.