Correlation Between Toronto Dominion and McDonalds Corp
Can any of the company-specific risk be diversified away by investing in both Toronto Dominion and McDonalds Corp 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 McDonalds Corp 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 McDonalds Corp CDR, you can compare the effects of market volatilities on Toronto Dominion and McDonalds Corp 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 McDonalds Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toronto Dominion and McDonalds Corp.
Diversification Opportunities for Toronto Dominion and McDonalds Corp
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Toronto and McDonalds is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank and McDonalds Corp CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds Corp CDR 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 McDonalds Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McDonalds Corp CDR has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and McDonalds Corp go up and down completely randomly.
Pair Corralation between Toronto Dominion and McDonalds Corp
Assuming the 90 days horizon Toronto Dominion Bank is expected to generate 1.08 times more return on investment than McDonalds Corp. However, Toronto Dominion is 1.08 times more volatile than McDonalds Corp CDR. It trades about 0.39 of its potential returns per unit of risk. McDonalds Corp CDR is currently generating about -0.06 per unit of risk. If you would invest 7,547 in Toronto Dominion Bank on November 3, 2024 and sell it today you would earn a total of 744.00 from holding Toronto Dominion Bank or generate 9.86% 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. McDonalds Corp CDR
Performance |
| Timeline |
| Toronto Dominion Bank |
| McDonalds Corp CDR |
Toronto Dominion and McDonalds Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toronto Dominion and McDonalds Corp
The main advantage of trading using opposite Toronto Dominion and McDonalds Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toronto Dominion position performs unexpectedly, McDonalds Corp 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 McDonalds Corp will offset losses from the drop in McDonalds Corp'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 |
| McDonalds Corp vs. Rogers Communications | McDonalds Corp vs. Dream Industrial Real | McDonalds Corp vs. XXIX Metal Corp | McDonalds Corp vs. Hemisphere Energy |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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