Correlation Between Bank of Nova Scotia and UBS Group

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

Diversification Opportunities for Bank of Nova Scotia and UBS Group

-0.26

Correlation Coefficient

Bank of Nova Scotia  UBS Group

Very good diversification

The 3 months correlation between Bank and UBS is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding The Bank of and UBS Group AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS Group AG 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 Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBS Group AG has no effect on the direction of Bank of Nova Scotia i.e., Bank of Nova Scotia and UBS Group go up and down completely randomly.

Pair Corralation between Bank of Nova Scotia and UBS Group

Assuming the 90 days trading horizon The Bank of is expected to under-perform the UBS Group. But the stock apears to be less risky and, when comparing its historical volatility, The Bank of is 3.06 times less risky than UBS Group. The stock trades about -0.1 of its potential returns per unit of risk. The UBS Group AG is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  66,000  in UBS Group AG on December 28, 2024 and sell it today you would earn a total of  2,026  from holding UBS Group AG or generate 3.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

The Bank of  vs.  UBS Group AG

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. In spite of fairly strong basic indicators, Bank of Nova Scotia is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

UBS Group AG

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in UBS Group AG are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, UBS Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bank of Nova Scotia and UBS Group

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

The idea behind The Bank of and UBS Group AG 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.