Correlation Between Credit Suisse and Bank of Nova Scotia

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

Diversification Opportunities for Credit Suisse and Bank of Nova Scotia

-0.1
  Correlation Coefficient

Good diversification

The 3 months correlation between Credit and Bank is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Credit Suisse Group 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 Credit Suisse 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 Credit Suisse Group 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 Credit Suisse i.e., Credit Suisse and Bank of Nova Scotia go up and down completely randomly.

Pair Corralation between Credit Suisse and Bank of Nova Scotia

Allowing for the 90-day total investment horizon Credit Suisse Group is expected to under-perform the Bank of Nova Scotia. In addition to that, Credit Suisse is 3.37 times more volatile than Bank Of Nova. It trades about -0.12 of its total potential returns per unit of risk. Bank Of Nova is currently generating about -0.02 per unit of volatility. If you would invest  6,160  in Bank Of Nova on December 30, 2023 and sell it today you would lose (982.00) from holding Bank Of Nova or give up 15.94% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy59.92%
ValuesDaily Returns

Credit Suisse Group  vs.  Bank Of Nova

 Performance 
       Timeline  
Credit Suisse Group 

Risk-Adjusted Performance

0 of 100

 
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Very Weak
Over the last 90 days Credit Suisse Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Credit Suisse is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.
Bank of Nova Scotia 

Risk-Adjusted Performance

11 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Bank Of Nova are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Bank of Nova Scotia may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Credit Suisse and Bank of Nova Scotia Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Credit Suisse and Bank of Nova Scotia

The main advantage of trading using opposite Credit Suisse and Bank of Nova Scotia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Credit Suisse 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 Credit Suisse Group 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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