Correlation Between Toronto Dominion and Loblaw Companies
Can any of the company-specific risk be diversified away by investing in both Toronto Dominion and Loblaw Companies 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 Loblaw Companies 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 Loblaw Companies Limited, you can compare the effects of market volatilities on Toronto Dominion and Loblaw Companies 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 Loblaw Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toronto Dominion and Loblaw Companies.
Diversification Opportunities for Toronto Dominion and Loblaw Companies
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Toronto and Loblaw is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank and Loblaw Companies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loblaw Companies 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 Loblaw Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loblaw Companies has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and Loblaw Companies go up and down completely randomly.
Pair Corralation between Toronto Dominion and Loblaw Companies
Assuming the 90 days horizon Toronto Dominion Bank is expected to generate 0.91 times more return on investment than Loblaw Companies. However, Toronto Dominion Bank is 1.1 times less risky than Loblaw Companies. It trades about 0.31 of its potential returns per unit of risk. Loblaw Companies Limited is currently generating about -0.37 per unit of risk. If you would invest 7,485 in Toronto Dominion Bank on October 14, 2024 and sell it today you would earn a total of 335.00 from holding Toronto Dominion Bank or generate 4.48% 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 vs. Loblaw Companies Limited
Performance |
| Timeline |
| Toronto Dominion Bank |
| Loblaw Companies |
Toronto Dominion and Loblaw Companies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toronto Dominion and Loblaw Companies
The main advantage of trading using opposite Toronto Dominion and Loblaw Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toronto Dominion position performs unexpectedly, Loblaw Companies 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 Loblaw Companies will offset losses from the drop in Loblaw Companies' 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 |
| Loblaw Companies vs. Metro Inc | Loblaw Companies vs. George Weston Limited | Loblaw Companies vs. Canadian Tire | Loblaw Companies vs. Dollarama |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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