Correlation Between Toronto Dominion and Bank of Nova Scotia
Can any of the company-specific risk be diversified away by investing in both Toronto Dominion and Bank of Nova Scotia 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 Bank of Nova Scotia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Toronto Dominion Bank and Bank of Nova, you can compare the effects of market volatilities on Toronto Dominion and Bank of Nova Scotia 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 Bank of Nova Scotia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toronto Dominion and Bank of Nova Scotia.
Diversification Opportunities for Toronto Dominion and Bank of Nova Scotia
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Toronto and Bank is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank and Bank of Nova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Nova Scotia 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 are associated (or correlated) with Bank of Nova Scotia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Nova Scotia has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and Bank of Nova Scotia go up and down completely randomly.
Pair Corralation between Toronto Dominion and Bank of Nova Scotia
Assuming the 90 days horizon Toronto Dominion is expected to generate 4.61 times less return on investment than Bank of Nova Scotia. In addition to that, Toronto Dominion is 1.14 times more volatile than Bank of Nova. It trades about 0.04 of its total potential returns per unit of risk. Bank of Nova is currently generating about 0.19 per unit of volatility. If you would invest 6,355 in Bank of Nova on August 24, 2024 and sell it today you would earn a total of 1,495 from holding Bank of Nova or generate 23.52% 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 vs. Bank of Nova
Performance |
| Timeline |
| Toronto Dominion Bank |
| Bank of Nova Scotia |
Toronto Dominion and Bank of Nova Scotia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toronto Dominion and Bank of Nova Scotia
The main advantage of trading using opposite Toronto Dominion and Bank of Nova Scotia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toronto Dominion position performs unexpectedly, Bank of Nova Scotia 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 Bank of Nova Scotia will offset losses from the drop in Bank of Nova Scotia's long position.| Toronto Dominion vs. Royal Bank of | Toronto Dominion vs. Bank of Nova | Toronto Dominion vs. Bank of Montreal | Toronto Dominion vs. Canadian Imperial Bank |
| Bank of Nova Scotia vs. Toronto Dominion Bank | Bank of Nova Scotia vs. Royal Bank of | Bank of Nova Scotia vs. Bank of Montreal | Bank of Nova Scotia vs. Canadian Imperial Bank |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
Other Complementary Tools
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios |