Correlation Between Bank of Nova Scotia and Papa Johns
Can any of the company-specific risk be diversified away by investing in both Bank of Nova Scotia and Papa Johns 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 Papa Johns 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 Papa Johns International, you can compare the effects of market volatilities on Bank of Nova Scotia and Papa Johns 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 Papa Johns. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Nova Scotia and Papa Johns.
Diversification Opportunities for Bank of Nova Scotia and Papa Johns
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Bank and Papa is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Nova and Papa Johns International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Papa Johns International 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 Papa Johns. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Papa Johns International has no effect on the direction of Bank of Nova Scotia i.e., Bank of Nova Scotia and Papa Johns go up and down completely randomly.
Pair Corralation between Bank of Nova Scotia and Papa Johns
Assuming the 90 days trading horizon Bank of Nova is expected to generate 0.72 times more return on investment than Papa Johns. However, Bank of Nova is 1.38 times less risky than Papa Johns. It trades about -0.22 of its potential returns per unit of risk. Papa Johns International is currently generating about -0.18 per unit of risk. If you would invest 6,730 in Bank of Nova on January 24, 2024 and sell it today you would lose (279.00) from holding Bank of Nova or give up 4.15% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of Nova vs. Papa Johns International
Performance |
| Timeline |
| Bank of Nova Scotia |
| Papa Johns International |
Bank of Nova Scotia and Papa Johns Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Nova Scotia and Papa Johns
The main advantage of trading using opposite Bank of Nova Scotia and Papa Johns positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Nova Scotia position performs unexpectedly, Papa Johns 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 Papa Johns will offset losses from the drop in Papa Johns' long position.| Bank of Nova Scotia vs. Toronto Dominion Bank | Bank of Nova Scotia vs. Royal Bank of | Bank of Nova Scotia vs. Bank of Montreal | Bank of Nova Scotia vs. Canadian Imperial Bank |
| Papa Johns vs. Yum Brands | Papa Johns vs. Wingstop | Papa Johns vs. Darden Restaurants | Papa Johns vs. Chipotle Mexican Grill |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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