Correlation Between Toronto Dominion and IA Financial
Can any of the company-specific risk be diversified away by investing in both Toronto Dominion and IA Financial 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 Toronto Dominion and IA Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Toronto Dominion Bank and iA Financial, you can compare the effects of market volatilities on Toronto Dominion and IA Financial 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 Toronto Dominion with a short position of IA Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toronto Dominion and IA Financial.
Diversification Opportunities for Toronto Dominion and IA Financial
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Toronto and IAG is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank and iA Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iA Financial and Toronto Dominion 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 Toronto Dominion Bank are associated (or correlated) with IA Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iA Financial has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and IA Financial go up and down completely randomly.
Pair Corralation between Toronto Dominion and IA Financial
Assuming the 90 days trading horizon Toronto Dominion Bank is expected to generate 0.75 times more return on investment than IA Financial. However, Toronto Dominion Bank is 1.33 times less risky than IA Financial. It trades about 0.1 of its potential returns per unit of risk. iA Financial is currently generating about 0.04 per unit of risk. If you would invest 2,410 in Toronto Dominion Bank on October 26, 2024 and sell it today you would earn a total of 54.00 from holding Toronto Dominion Bank or generate 2.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 85.37% |
| Values | Daily Returns |
Toronto Dominion Bank vs. iA Financial
Performance |
| Timeline |
| Toronto Dominion Bank |
| iA Financial |
Toronto Dominion and IA Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toronto Dominion and IA Financial
The main advantage of trading using opposite Toronto Dominion and IA Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toronto Dominion position performs unexpectedly, IA Financial 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 IA Financial will offset losses from the drop in IA Financial's long position.| Toronto Dominion vs. Data Communications Management | Toronto Dominion vs. Metalero Mining Corp | Toronto Dominion vs. High Liner Foods | Toronto Dominion vs. MAG Silver Corp |
| IA Financial vs. Great West Lifeco | IA Financial vs. Intact Financial | IA Financial vs. IGM Financial | IA Financial vs. Sun Life Financial |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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