Correlation Between Toronto Dominion and Prime Dividend
Can any of the company-specific risk be diversified away by investing in both Toronto Dominion and Prime Dividend 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 Prime Dividend 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 Prime Dividend Corp, you can compare the effects of market volatilities on Toronto Dominion and Prime Dividend 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 Prime Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toronto Dominion and Prime Dividend.
Diversification Opportunities for Toronto Dominion and Prime Dividend
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Toronto and Prime is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank Pref and Prime Dividend Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prime Dividend 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 Prime Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prime Dividend Corp has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and Prime Dividend go up and down completely randomly.
Pair Corralation between Toronto Dominion and Prime Dividend
Assuming the 90 days trading horizon Toronto Dominion is expected to generate 18.62 times less return on investment than Prime Dividend. But when comparing it to its historical volatility, Toronto Dominion Bank Pref is 3.99 times less risky than Prime Dividend. It trades about 0.06 of its potential returns per unit of risk. Prime Dividend Corp is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 784.00 in Prime Dividend Corp on August 30, 2024 and sell it today you would earn a total of 65.00 from holding Prime Dividend Corp or generate 8.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Toronto Dominion Bank Pref vs. Prime Dividend Corp
Performance |
| Timeline |
| Toronto Dominion Bank |
| Prime Dividend Corp |
Toronto Dominion and Prime Dividend Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toronto Dominion and Prime Dividend
The main advantage of trading using opposite Toronto Dominion and Prime Dividend positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toronto Dominion position performs unexpectedly, Prime Dividend 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 Prime Dividend will offset losses from the drop in Prime Dividend's long position.The idea behind Toronto Dominion Bank Pref and Prime Dividend 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.| Prime Dividend vs. TDb Split Corp | Prime Dividend vs. Dividend Select 15 | Prime Dividend vs. Canadian Life Companies | Prime Dividend vs. Brompton Lifeco Split |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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