Correlation Between Plaza Retail and Bank of Nova Scotia

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

Diversification Opportunities for Plaza Retail and Bank of Nova Scotia

-0.79

Correlation Coefficient

Plaza Retail  Bank of Nova Scotia

Pay attention - limited upside

The 3 months correlation between Plaza and Bank is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Plaza Retail REIT and Bank of Nova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Nova Scotia and Plaza Retail 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 Plaza Retail REIT 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 Plaza Retail i.e., Plaza Retail and Bank of Nova Scotia go up and down completely randomly.

Pair Corralation between Plaza Retail and Bank of Nova Scotia

Assuming the 90 days trading horizon Plaza Retail REIT is expected to under-perform the Bank of Nova Scotia. But the stock apears to be less risky and, when comparing its historical volatility, Plaza Retail REIT is 1.63 times less risky than Bank of Nova Scotia. The stock trades about -0.27 of its potential returns per unit of risk. The Bank of Nova is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  7,743  in Bank of Nova on September 19, 2024 and sell it today you would earn a total of  94.00  from holding Bank of Nova or generate 1.21% return on investment over 90 days.

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

Plaza Retail REIT  vs.  Bank of Nova

Plaza Retail REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Plaza Retail REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Bank of Nova Scotia

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Nova are ranked lower than 14 (%) 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.

Pair Trading with Plaza Retail and Bank of Nova Scotia

The main advantage of trading using opposite Plaza Retail and Bank of Nova Scotia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plaza Retail 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 Plaza Retail REIT and Bank of Nova 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.

Check out your portfolio center.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.