Correlation Between Bank of Nova Scotia and Big Rock

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

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

Diversification Opportunities for Bank of Nova Scotia and Big Rock

-0.17

Correlation Coefficient

Bank of Nova Scotia  Big Rock

Good diversification

The 3 months correlation between Bank and Big is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Nova and Big Rock Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Rock Brewery 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 Bank of Nova are associated (or correlated) with Big Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Rock Brewery has no effect on the direction of Bank of Nova Scotia i.e., Bank of Nova Scotia and Big Rock go up and down completely randomly.

Pair Corralation between Bank of Nova Scotia and Big Rock

Assuming the 90 days trading horizon Bank of Nova Scotia is expected to generate 11.64 times less return on investment than Big Rock. But when comparing it to its historical volatility, Bank of Nova is 10.15 times less risky than Big Rock. It trades about 0.07 of its potential returns per unit of risk. Big Rock Brewery is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  20.00  in Big Rock Brewery on October 24, 2024 and sell it today you would earn a total of  81.00  from holding Big Rock Brewery or generate 405.0% return on investment over 90 days.

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

Bank of Nova  vs.  Big Rock Brewery

Bank of Nova Scotia

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Nova are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Bank of Nova Scotia is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Big Rock Brewery

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Big Rock Brewery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Bank of Nova Scotia and Big Rock

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

The idea behind Bank of Nova and Big Rock Brewery 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 Global Correlations module to find global opportunities by holding instruments from different markets.