Correlation Between Bank of Nova Scotia and JPMorgan Chase

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

Diversification Opportunities for Bank of Nova Scotia and JPMorgan Chase

0.94

Correlation Coefficient

Bank of Nova Scotia  JPMorgan Chase

Almost no diversification

The 3 months correlation between Bank and JPMorgan is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Nova and JPMorgan Chase Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Chase 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 JPMorgan Chase. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan Chase has no effect on the direction of Bank of Nova Scotia i.e., Bank of Nova Scotia and JPMorgan Chase go up and down completely randomly.

Pair Corralation between Bank of Nova Scotia and JPMorgan Chase

Considering the 90-day investment horizon Bank of Nova is expected to under-perform the JPMorgan Chase. But the stock apears to be less risky and, when comparing its historical volatility, Bank of Nova is 1.53 times less risky than JPMorgan Chase. The stock trades about -0.22 of its potential returns per unit of risk. The JPMorgan Chase Co is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  19,369  in JPMorgan Chase Co on January 25, 2024 and sell it today you would lose (61.00) from holding JPMorgan Chase Co or give up 0.31% 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.  JPMorgan Chase Co

Bank of Nova Scotia

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Nova are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Bank of Nova Scotia is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

JPMorgan Chase

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Chase Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, JPMorgan Chase may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Bank of Nova Scotia and JPMorgan Chase

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

The idea behind Bank of Nova and JPMorgan Chase Co 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.