Correlation Between Toronto Dominion and Magna International
Can any of the company-specific risk be diversified away by investing in both Toronto Dominion and Magna International 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 Magna International 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 Magna International, you can compare the effects of market volatilities on Toronto Dominion and Magna International 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 Magna International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toronto Dominion and Magna International.
Diversification Opportunities for Toronto Dominion and Magna International
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Toronto and Magna is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International 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 Magna International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magna International has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and Magna International go up and down completely randomly.
Pair Corralation between Toronto Dominion and Magna International
Assuming the 90 days horizon Toronto Dominion Bank is expected to generate 1.02 times more return on investment than Magna International. However, Toronto Dominion is 1.02 times more volatile than Magna International. It trades about 0.44 of its potential returns per unit of risk. Magna International is currently generating about -0.14 per unit of risk. If you would invest 7,459 in Toronto Dominion Bank on October 24, 2024 and sell it today you would earn a total of 752.00 from holding Toronto Dominion Bank or generate 10.08% 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. Magna International
Performance |
Timeline |
Toronto Dominion Bank |
Magna International |
Toronto Dominion and Magna International Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Toronto Dominion and Magna International
The main advantage of trading using opposite Toronto Dominion and Magna International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toronto Dominion position performs unexpectedly, Magna International 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 Magna International will offset losses from the drop in Magna International'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 |
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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