Correlation Between Bank of Nova Scotia and Sprott Physical

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

Diversification Opportunities for Bank of Nova Scotia and Sprott Physical

-0.55

Correlation Coefficient

Bank of Nova Scotia  Sprott Physical

Excellent diversification

The 3 months correlation between Bank and Sprott is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Nova and Sprott Physical Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Physical Silver 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 Sprott Physical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Physical Silver has no effect on the direction of Bank of Nova Scotia i.e., Bank of Nova Scotia and Sprott Physical go up and down completely randomly.

Pair Corralation between Bank of Nova Scotia and Sprott Physical

Assuming the 90 days trading horizon Bank of Nova Scotia is expected to generate 1.28 times less return on investment than Sprott Physical. But when comparing it to its historical volatility, Bank of Nova is 1.61 times less risky than Sprott Physical. It trades about 0.05 of its potential returns per unit of risk. Sprott Physical Silver is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,082  in Sprott Physical Silver on October 9, 2024 and sell it today you would earn a total of  349.00  from holding Sprott Physical Silver or generate 32.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Bank of Nova  vs.  Sprott Physical Silver

Bank of Nova Scotia

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Nova are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Bank of Nova Scotia may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Sprott Physical Silver

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Physical Silver are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Sprott Physical is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Bank of Nova Scotia and Sprott Physical

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

The idea behind Bank of Nova and Sprott Physical Silver 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.