Correlation Between Bank of Nova Scotia and American Funds
Can any of the company-specific risk be diversified away by investing in both Bank of Nova Scotia and American Funds 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 American Funds 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 American Funds Global, you can compare the effects of market volatilities on Bank of Nova Scotia and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Nova Scotia and American Funds.
Diversification Opportunities for Bank of Nova Scotia and American Funds
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Bank and American is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Nova and American Funds Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Global 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Global has no effect on the direction of Bank of Nova Scotia i.e., Bank of Nova Scotia and American Funds go up and down completely randomly.
Pair Corralation between Bank of Nova Scotia and American Funds
Considering the 90-day investment horizon Bank of Nova is expected to under-perform the American Funds. In addition to that, Bank of Nova Scotia is 1.71 times more volatile than American Funds Global. It trades about -0.25 of its total potential returns per unit of risk. American Funds Global is currently generating about -0.29 per unit of volatility. If you would invest 2,207 in American Funds Global on January 20, 2024 and sell it today you would lose (90.00) from holding American Funds Global or give up 4.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of Nova vs. American Funds Global
Performance |
| Timeline |
| Bank of Nova Scotia |
| American Funds Global |
Bank of Nova Scotia and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Nova Scotia and American Funds
The main advantage of trading using opposite Bank of Nova Scotia and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Nova Scotia position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' 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 |
| American Funds vs. Columbia Capital Allocation | American Funds vs. State Street Institutional | American Funds vs. Blackrock Basic Value | American Funds vs. Europacific Growth Fund |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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