Correlation Between Toronto Dominion and NexPoint Hospitality
Can any of the company-specific risk be diversified away by investing in both Toronto Dominion and NexPoint Hospitality 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 NexPoint Hospitality 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 NexPoint Hospitality Trust, you can compare the effects of market volatilities on Toronto Dominion and NexPoint Hospitality 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 NexPoint Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toronto Dominion and NexPoint Hospitality.
Diversification Opportunities for Toronto Dominion and NexPoint Hospitality
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Toronto and NexPoint is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank Pref and NexPoint Hospitality Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NexPoint Hospitality 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 NexPoint Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NexPoint Hospitality has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and NexPoint Hospitality go up and down completely randomly.
Pair Corralation between Toronto Dominion and NexPoint Hospitality
Assuming the 90 days trading horizon Toronto Dominion is expected to generate 1064.51 times less return on investment than NexPoint Hospitality. But when comparing it to its historical volatility, Toronto Dominion Bank Pref is 648.82 times less risky than NexPoint Hospitality. It trades about 0.13 of its potential returns per unit of risk. NexPoint Hospitality Trust is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 1.50 in NexPoint Hospitality Trust on August 29, 2024 and sell it today you would earn a total of 28.50 from holding NexPoint Hospitality Trust or generate 1900.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Toronto Dominion Bank Pref vs. NexPoint Hospitality Trust
Performance |
| Timeline |
| Toronto Dominion Bank |
| NexPoint Hospitality |
Toronto Dominion and NexPoint Hospitality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toronto Dominion and NexPoint Hospitality
The main advantage of trading using opposite Toronto Dominion and NexPoint Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toronto Dominion position performs unexpectedly, NexPoint Hospitality 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 NexPoint Hospitality will offset losses from the drop in NexPoint Hospitality's long position.The idea behind Toronto Dominion Bank Pref and NexPoint Hospitality Trust 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.| NexPoint Hospitality vs. Gatos Silver | NexPoint Hospitality vs. Partners Value Investments | NexPoint Hospitality vs. Capstone Mining Corp | NexPoint Hospitality vs. Faction Investment Group |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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