Correlation Between Toronto Dominion and Sun Life
Can any of the company-specific risk be diversified away by investing in both Toronto Dominion and Sun Life 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 Sun Life 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 Sun Life Financial, you can compare the effects of market volatilities on Toronto Dominion and Sun Life 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 Sun Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toronto Dominion and Sun Life.
Diversification Opportunities for Toronto Dominion and Sun Life
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Toronto and Sun is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank Pref and Sun Life Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Life 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 Pref are associated (or correlated) with Sun Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Life Financial has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and Sun Life go up and down completely randomly.
Pair Corralation between Toronto Dominion and Sun Life
Assuming the 90 days trading horizon Toronto Dominion is expected to generate 1.22 times less return on investment than Sun Life. But when comparing it to its historical volatility, Toronto Dominion Bank Pref is 1.42 times less risky than Sun Life. It trades about 0.06 of its potential returns per unit of risk. Sun Life Financial is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,641 in Sun Life Financial on August 28, 2024 and sell it today you would earn a total of 370.00 from holding Sun Life Financial or generate 22.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Toronto Dominion Bank Pref vs. Sun Life Financial
Performance |
| Timeline |
| Toronto Dominion Bank |
| Sun Life Financial |
Toronto Dominion and Sun Life Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toronto Dominion and Sun Life
The main advantage of trading using opposite Toronto Dominion and Sun Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toronto Dominion position performs unexpectedly, Sun Life 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 Sun Life will offset losses from the drop in Sun Life's long position.The idea behind Toronto Dominion Bank Pref and Sun Life Financial 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.| Sun Life vs. Forstrong Global Income | Sun Life vs. BMO Aggregate Bond | Sun Life vs. Terreno Resources Corp | Sun Life vs. iShares Canadian HYBrid |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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