Correlation Between Economic Investment and Toronto Dominion

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

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

Diversification Opportunities for Economic Investment and Toronto Dominion

-0.1

Correlation Coefficient

Economic Investment  Toronto Dominion

Good diversification

The 3 months correlation between Economic and Toronto is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Economic Investment Trust 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 Economic Investment 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 Economic Investment Trust 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 Economic Investment i.e., Economic Investment and Toronto Dominion go up and down completely randomly.

Pair Corralation between Economic Investment and Toronto Dominion

Assuming the 90 days trading horizon Economic Investment Trust is expected to under-perform the Toronto Dominion. But the stock apears to be less risky and, when comparing its historical volatility, Economic Investment Trust is 1.69 times less risky than Toronto Dominion. The stock trades about -0.27 of its potential returns per unit of risk. The Toronto Dominion Bank is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  7,919  in Toronto Dominion Bank on October 4, 2024 and sell it today you would lose (269.00) from holding Toronto Dominion Bank or give up 3.4% of portfolio value over 90 days.

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

Economic Investment Trust  vs.  Toronto Dominion Bank

Economic Investment Trust

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Economic Investment Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Economic Investment is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

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 Economic Investment and Toronto Dominion

The main advantage of trading using opposite Economic Investment and Toronto Dominion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Economic Investment 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 Economic Investment Trust 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.