Correlation Between Bank of Nova Scotia and Commerce Split

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

Diversification Opportunities for Bank of Nova Scotia and Commerce Split

0.8

Correlation Coefficient

Bank of Nova Scotia  Commerce Split

Very poor diversification

The 3 months correlation between Bank and Commerce is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Nova and Commerce Split Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commerce Split Corp 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 Commerce Split. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commerce Split Corp has no effect on the direction of Bank of Nova Scotia i.e., Bank of Nova Scotia and Commerce Split go up and down completely randomly.

Pair Corralation between Bank of Nova Scotia and Commerce Split

Assuming the 90 days trading horizon Bank of Nova is expected to generate 0.43 times more return on investment than Commerce Split. However, Bank of Nova is 2.33 times less risky than Commerce Split. It trades about -0.32 of its potential returns per unit of risk. Commerce Split Corp is currently generating about -0.32 per unit of risk. If you would invest  7,917  in Bank of Nova on October 9, 2024 and sell it today you would lose (224.00) from holding Bank of Nova or give up 2.83% of portfolio value over 90 days.

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

Bank of Nova  vs.  Commerce Split Corp

Bank of Nova Scotia

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Nova are ranked lower than 9 (%) 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.

Commerce Split Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Commerce Split Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal primary indicators, Commerce Split 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 Commerce Split

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

The idea behind Bank of Nova and Commerce Split Corp 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 Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.