Correlation Between Toronto Dominion and ADF
Can any of the company-specific risk be diversified away by investing in both Toronto Dominion and ADF 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 ADF 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 ADF Group, you can compare the effects of market volatilities on Toronto Dominion and ADF 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 ADF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toronto Dominion and ADF.
Diversification Opportunities for Toronto Dominion and ADF
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Toronto and ADF is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank Pref and ADF Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADF Group 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 ADF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADF Group has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and ADF go up and down completely randomly.
Pair Corralation between Toronto Dominion and ADF
Assuming the 90 days trading horizon Toronto Dominion Bank Pref is expected to generate 0.11 times more return on investment than ADF. However, Toronto Dominion Bank Pref is 9.28 times less risky than ADF. It trades about 0.13 of its potential returns per unit of risk. ADF Group is currently generating about 0.01 per unit of risk. If you would invest 2,334 in Toronto Dominion Bank Pref on August 27, 2024 and sell it today you would earn a total of 270.00 from holding Toronto Dominion Bank Pref or generate 11.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Toronto Dominion Bank Pref vs. ADF Group
Performance |
| Timeline |
| Toronto Dominion Bank |
| ADF Group |
Toronto Dominion and ADF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toronto Dominion and ADF
The main advantage of trading using opposite Toronto Dominion and ADF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toronto Dominion position performs unexpectedly, ADF 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 ADF will offset losses from the drop in ADF's long position.| Toronto Dominion vs. Enbridge Pref 5 | Toronto Dominion vs. E Split Corp | Toronto Dominion vs. Sage Potash Corp |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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