Correlation Between New Residential and Toronto Dominion
Can any of the company-specific risk be diversified away by investing in both New Residential and Toronto Dominion 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 New Residential and Toronto Dominion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Residential Investment and The Toronto Dominion Bank, you can compare the effects of market volatilities on New Residential and Toronto Dominion 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 New Residential with a short position of Toronto Dominion. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Residential and Toronto Dominion.
Diversification Opportunities for New Residential and Toronto Dominion
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between New and Toronto is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and The Toronto Dominion Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toronto Dominion and New Residential 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 New Residential Investment are associated (or correlated) with Toronto Dominion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toronto Dominion has no effect on the direction of New Residential i.e., New Residential and Toronto Dominion go up and down completely randomly.
Pair Corralation between New Residential and Toronto Dominion
Assuming the 90 days trading horizon New Residential Investment is expected to generate 0.51 times more return on investment than Toronto Dominion. However, New Residential Investment is 1.95 times less risky than Toronto Dominion. It trades about 0.2 of its potential returns per unit of risk. The Toronto Dominion Bank is currently generating about -0.13 per unit of risk. If you would invest 1,013 in New Residential Investment on September 12, 2024 and sell it today you would earn a total of 42.00 from holding New Residential Investment or generate 4.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Residential Investment vs. The Toronto Dominion Bank
Performance |
| Timeline |
| New Residential Inve |
| Toronto Dominion |
New Residential and Toronto Dominion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Residential and Toronto Dominion
The main advantage of trading using opposite New Residential and Toronto Dominion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Residential position performs unexpectedly, Toronto Dominion 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 Toronto Dominion will offset losses from the drop in Toronto Dominion's long position.| New Residential vs. PKSHA TECHNOLOGY INC | New Residential vs. FARO Technologies | New Residential vs. CI GAMES SA | New Residential vs. EAST SIDE GAMES |
| Toronto Dominion vs. BlueScope Steel Limited | Toronto Dominion vs. TRAVEL LEISURE DL 01 | Toronto Dominion vs. Nippon Steel | Toronto Dominion vs. CECO ENVIRONMENTAL |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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