Correlation Between Bank of Nova Scotia and Barclays PLC
Can any of the company-specific risk be diversified away by investing in both Bank of Nova Scotia and Barclays PLC 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 Barclays PLC 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 Barclays PLC ADR, you can compare the effects of market volatilities on Bank of Nova Scotia and Barclays PLC 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 Barclays PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Nova Scotia and Barclays PLC.
Diversification Opportunities for Bank of Nova Scotia and Barclays PLC
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Barclays is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Nova and Barclays PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barclays PLC ADR 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 Barclays PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barclays PLC ADR has no effect on the direction of Bank of Nova Scotia i.e., Bank of Nova Scotia and Barclays PLC go up and down completely randomly.
Pair Corralation between Bank of Nova Scotia and Barclays PLC
Considering the 90-day investment horizon Bank of Nova is expected to under-perform the Barclays PLC. But the stock apears to be less risky and, when comparing its historical volatility, Bank of Nova is 1.29 times less risky than Barclays PLC. The stock trades about -0.22 of its potential returns per unit of risk. The Barclays PLC ADR is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 926.00 in Barclays PLC ADR on January 25, 2024 and sell it today you would earn a total of 34.00 from holding Barclays PLC ADR or generate 3.67% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Bank of Nova vs. Barclays PLC ADR
Performance |
Timeline |
Bank of Nova Scotia |
Barclays PLC ADR |
Bank of Nova Scotia and Barclays PLC Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Bank of Nova Scotia and Barclays PLC
The main advantage of trading using opposite Bank of Nova Scotia and Barclays PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Nova Scotia position performs unexpectedly, Barclays PLC 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 Barclays PLC will offset losses from the drop in Barclays PLC's long position.Bank of Nova Scotia vs. Toronto Dominion Bank | Bank of Nova Scotia vs. Royal Bank of | Bank of Nova Scotia vs. Canadian Imperial Bank | Bank of Nova Scotia vs. JPMorgan Chase Co |
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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