Correlation Between Toronto Dominion and Automotive Finco
Can any of the company-specific risk be diversified away by investing in both Toronto Dominion and Automotive Finco 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 Automotive Finco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Toronto Dominion Bank Pref and Automotive Finco Corp, you can compare the effects of market volatilities on Toronto Dominion and Automotive Finco 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 Automotive Finco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toronto Dominion and Automotive Finco.
Diversification Opportunities for Toronto Dominion and Automotive Finco
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Toronto and Automotive is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank Pref and Automotive Finco Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automotive Finco Corp 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 Pref are associated (or correlated) with Automotive Finco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automotive Finco Corp has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and Automotive Finco go up and down completely randomly.
Pair Corralation between Toronto Dominion and Automotive Finco
Assuming the 90 days trading horizon Toronto Dominion is expected to generate 1.55 times less return on investment than Automotive Finco. But when comparing it to its historical volatility, Toronto Dominion Bank Pref is 9.85 times less risky than Automotive Finco. It trades about 0.06 of its potential returns per unit of risk. Automotive Finco Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 148.00 in Automotive Finco Corp on September 3, 2024 and sell it today you would lose (59.00) from holding Automotive Finco Corp or give up 39.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Toronto Dominion Bank Pref vs. Automotive Finco Corp
Performance |
| Timeline |
| Toronto Dominion Bank |
| Automotive Finco Corp |
Toronto Dominion and Automotive Finco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toronto Dominion and Automotive Finco
The main advantage of trading using opposite Toronto Dominion and Automotive Finco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toronto Dominion position performs unexpectedly, Automotive Finco 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 Automotive Finco will offset losses from the drop in Automotive Finco's long position.The idea behind Toronto Dominion Bank Pref and Automotive Finco Corp 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.| Automotive Finco vs. Brookfield Investments | Automotive Finco vs. Canaf Investments | Automotive Finco vs. SalesforceCom CDR | Automotive Finco vs. Canlan Ice Sports |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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