Correlation Between INDIKA ENERGY and Bank of Nova Scotia

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

By analyzing existing cross correlation between INDIKA ENERGY and The Bank of, you can compare the effects of market volatilities on INDIKA ENERGY and Bank of Nova Scotia 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 INDIKA ENERGY with a short position of Bank of Nova Scotia. Check out your portfolio center. Please also check ongoing floating volatility patterns of INDIKA ENERGY and Bank of Nova Scotia.

Diversification Opportunities for INDIKA ENERGY and Bank of Nova Scotia

-0.78

Correlation Coefficient

INDIKA ENERGY  Bank of Nova Scotia

Pay attention - limited upside

The 3 months correlation between INDIKA and Bank is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding INDIKA ENERGY and The Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Nova Scotia and INDIKA ENERGY 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 INDIKA ENERGY are associated (or correlated) with Bank of Nova Scotia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Nova Scotia has no effect on the direction of INDIKA ENERGY i.e., INDIKA ENERGY and Bank of Nova Scotia go up and down completely randomly.

Pair Corralation between INDIKA ENERGY and Bank of Nova Scotia

Assuming the 90 days trading horizon INDIKA ENERGY is expected to generate 3.03 times more return on investment than Bank of Nova Scotia. However, INDIKA ENERGY is 3.03 times more volatile than The Bank of. It trades about 0.05 of its potential returns per unit of risk. The Bank of is currently generating about -0.12 per unit of risk. If you would invest  7.50  in INDIKA ENERGY on October 9, 2024 and sell it today you would earn a total of  0.15  from holding INDIKA ENERGY or generate 2.0% return on investment over 90 days.

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

INDIKA ENERGY  vs.  The Bank of

INDIKA ENERGY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INDIKA ENERGY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Bank of Nova Scotia

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Bank of are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Bank of Nova Scotia may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with INDIKA ENERGY and Bank of Nova Scotia

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

The idea behind INDIKA ENERGY and The Bank of 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.