Correlation Between Toronto Dominion and Mercantile Bank
Can any of the company-specific risk be diversified away by investing in both Toronto Dominion and Mercantile Bank 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 Mercantile Bank 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 Mercantile Bank, you can compare the effects of market volatilities on Toronto Dominion and Mercantile Bank 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 Mercantile Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toronto Dominion and Mercantile Bank.
Diversification Opportunities for Toronto Dominion and Mercantile Bank
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Toronto and Mercantile is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank and Mercantile Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercantile Bank 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 Mercantile Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercantile Bank has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and Mercantile Bank go up and down completely randomly.
Pair Corralation between Toronto Dominion and Mercantile Bank
Allowing for the 90-day total investment horizon Toronto Dominion Bank is expected to under-perform the Mercantile Bank. But the stock apears to be less risky and, when comparing its historical volatility, Toronto Dominion Bank is 2.53 times less risky than Mercantile Bank. The stock trades about -0.04 of its potential returns per unit of risk. The Mercantile Bank is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 4,532 in Mercantile Bank on September 3, 2024 and sell it today you would earn a total of 473.00 from holding Mercantile Bank or generate 10.44% 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. Mercantile Bank
Performance |
| Timeline |
| Toronto Dominion Bank |
| Mercantile Bank |
Toronto Dominion and Mercantile Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toronto Dominion and Mercantile Bank
The main advantage of trading using opposite Toronto Dominion and Mercantile Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toronto Dominion position performs unexpectedly, Mercantile Bank 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 Mercantile Bank will offset losses from the drop in Mercantile Bank's long position.| Toronto Dominion vs. Partner Communications | Toronto Dominion vs. Merck Company | Toronto Dominion vs. Western Midstream Partners | Toronto Dominion vs. Edgewise Therapeutics |
| Mercantile Bank vs. JPMorgan Chase Co | Mercantile Bank vs. Citigroup | Mercantile Bank vs. Wells Fargo | Mercantile Bank vs. Toronto Dominion 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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