Correlation Between Fairfax Fin and Toronto Dominion
Can any of the company-specific risk be diversified away by investing in both Fairfax Fin 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 Fairfax Fin and Toronto Dominion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fairfax Fin Hld and Toronto Dominion Bank, you can compare the effects of market volatilities on Fairfax Fin 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 Fairfax Fin with a short position of Toronto Dominion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Fin and Toronto Dominion.
Diversification Opportunities for Fairfax Fin and Toronto Dominion
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fairfax and Toronto is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Fin Hld and Toronto Dominion Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toronto Dominion Bank and Fairfax Fin 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 Fairfax Fin Hld 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 Bank has no effect on the direction of Fairfax Fin i.e., Fairfax Fin and Toronto Dominion go up and down completely randomly.
Pair Corralation between Fairfax Fin and Toronto Dominion
Assuming the 90 days trading horizon Fairfax Fin Hld is expected to generate 1.41 times more return on investment than Toronto Dominion. However, Fairfax Fin is 1.41 times more volatile than Toronto Dominion Bank. It trades about 0.08 of its potential returns per unit of risk. Toronto Dominion Bank is currently generating about 0.04 per unit of risk. If you would invest 1,804 in Fairfax Fin Hld on August 24, 2024 and sell it today you would earn a total of 276.00 from holding Fairfax Fin Hld or generate 15.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Fin Hld vs. Toronto Dominion Bank
Performance |
| Timeline |
| Fairfax Fin Hld |
| Toronto Dominion Bank |
Fairfax Fin and Toronto Dominion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Fin and Toronto Dominion
The main advantage of trading using opposite Fairfax Fin and Toronto Dominion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Fin 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.| Fairfax Fin vs. QC Copper and | Fairfax Fin vs. Mako Mining Corp | Fairfax Fin vs. Verizon Communications CDR | Fairfax Fin vs. Arbor Metals Corp |
| Toronto Dominion vs. Royal Bank of | Toronto Dominion vs. Bank of Nova | Toronto Dominion vs. Bank of Montreal | Toronto Dominion vs. Canadian Imperial Bank |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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