Correlation Between Apple and Toronto Dominion

Can any of the company-specific risk be diversified away by investing in both Apple and Toronto Dominion 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 Apple and Toronto Dominion into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Apple Inc CDR and Toronto Dominion Bank, you can compare the effects of market volatilities on Apple and Toronto Dominion 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 Apple with a short position of Toronto Dominion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Toronto Dominion.

Diversification Opportunities for Apple and Toronto Dominion

-0.35

Correlation Coefficient

Apple  Toronto Dominion

Very good diversification

The 3 months correlation between Apple and Toronto is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc CDR and Toronto Dominion Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toronto Dominion Bank and Apple 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 Apple Inc CDR are associated (or correlated) with Toronto Dominion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toronto Dominion Bank has no effect on the direction of Apple i.e., Apple and Toronto Dominion go up and down completely randomly.

Pair Corralation between Apple and Toronto Dominion

Assuming the 90 days trading horizon Apple Inc CDR is expected to generate 0.67 times more return on investment than Toronto Dominion. However, Apple Inc CDR is 1.48 times less risky than Toronto Dominion. It trades about 0.02 of its potential returns per unit of risk. Toronto Dominion Bank is currently generating about -0.11 per unit of risk. If you would invest  3,560  in Apple Inc CDR on October 5, 2024 and sell it today you would earn a total of  9.00  from holding Apple Inc CDR or generate 0.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Apple Inc CDR  vs.  Toronto Dominion Bank

Apple Inc CDR

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc CDR are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Apple may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Toronto Dominion Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Toronto Dominion Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Apple and Toronto Dominion

The main advantage of trading using opposite Apple and Toronto Dominion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, Toronto Dominion 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 Toronto Dominion will offset losses from the drop in Toronto Dominion's long position.

The idea behind Apple Inc CDR and Toronto Dominion Bank pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.