Correlation Between Bank of Nova Scotia and Yerbae Brands

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

Diversification Opportunities for Bank of Nova Scotia and Yerbae Brands

-0.45
  Correlation Coefficient

Very good diversification

The 3 months correlation between Bank and Yerbae is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Nova and Yerbae Brands Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yerbae Brands 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 Yerbae Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yerbae Brands Corp has no effect on the direction of Bank of Nova Scotia i.e., Bank of Nova Scotia and Yerbae Brands go up and down completely randomly.

Pair Corralation between Bank of Nova Scotia and Yerbae Brands

Assuming the 90 days trading horizon Bank of Nova is expected to under-perform the Yerbae Brands. But the stock apears to be less risky and, when comparing its historical volatility, Bank of Nova is 15.19 times less risky than Yerbae Brands. The stock trades about -0.09 of its potential returns per unit of risk. The Yerbae Brands Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Yerbae Brands Corp on September 22, 2024 and sell it today you would lose (2.00) from holding Yerbae Brands Corp or give up 14.29% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Bank of Nova  vs.  Yerbae Brands Corp

 Performance 
       Timeline  
Bank of Nova Scotia 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Nova are ranked lower than 10 (%) 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 January 2025.
Yerbae Brands Corp 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Yerbae Brands Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yerbae Brands may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bank of Nova Scotia and Yerbae Brands Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bank of Nova Scotia and Yerbae Brands

The main advantage of trading using opposite Bank of Nova Scotia and Yerbae Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Nova Scotia position performs unexpectedly, Yerbae Brands 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 Yerbae Brands will offset losses from the drop in Yerbae Brands' long position.
The idea behind Bank of Nova and Yerbae Brands 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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