Correlation Between JPMorgan Chase and Bank of Nova Scotia

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

Diversification Opportunities for JPMorgan Chase and Bank of Nova Scotia

0.89
  Correlation Coefficient

Very poor diversification

The 3 months correlation between JPMorgan and Bank is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Chase Co 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 JPMorgan Chase 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 JPMorgan Chase Co 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 JPMorgan Chase i.e., JPMorgan Chase and Bank of Nova Scotia go up and down completely randomly.

Pair Corralation between JPMorgan Chase and Bank of Nova Scotia

Considering the 90-day investment horizon JPMorgan Chase Co is expected to generate 0.87 times more return on investment than Bank of Nova Scotia. However, JPMorgan Chase Co is 1.16 times less risky than Bank of Nova Scotia. It trades about 0.18 of its potential returns per unit of risk. Bank Of Nova is currently generating about 0.03 per unit of risk. If you would invest  12,485  in JPMorgan Chase Co on December 30, 2023 and sell it today you would earn a total of  7,545  from holding JPMorgan Chase Co or generate 60.43% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

JPMorgan Chase Co  vs.  Bank Of Nova

 Performance 
       Timeline  
JPMorgan Chase 

Risk-Adjusted Performance

24 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Chase Co are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, JPMorgan Chase displayed solid returns over the last few months and may actually be approaching a breakup point.
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.

JPMorgan Chase and Bank of Nova Scotia Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with JPMorgan Chase and Bank of Nova Scotia

The main advantage of trading using opposite JPMorgan Chase and Bank of Nova Scotia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JPMorgan Chase 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 JPMorgan Chase Co 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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