Correlation Between Hilton Worldwide and Toronto Dominion

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

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

Diversification Opportunities for Hilton Worldwide and Toronto Dominion

0.18

Correlation Coefficient

Hilton Worldwide  Toronto Dominion

Average diversification

The 3 months correlation between Hilton and Toronto is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Hilton Worldwide Holdings 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 Hilton Worldwide 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 Hilton Worldwide Holdings 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 Hilton Worldwide i.e., Hilton Worldwide and Toronto Dominion go up and down completely randomly.

Pair Corralation between Hilton Worldwide and Toronto Dominion

Considering the 90-day investment horizon Hilton Worldwide Holdings is expected to under-perform the Toronto Dominion. In addition to that, Hilton Worldwide is 1.52 times more volatile than Toronto Dominion Bank. It trades about -0.06 of its total potential returns per unit of risk. Toronto Dominion Bank is currently generating about 0.25 per unit of volatility. If you would invest  5,229  in Toronto Dominion Bank on December 27, 2024 and sell it today you would earn a total of  866.00  from holding Toronto Dominion Bank or generate 16.56% return on investment over 90 days.

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

Hilton Worldwide Holdings  vs.  Toronto Dominion Bank

Hilton Worldwide Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hilton Worldwide Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Hilton Worldwide is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Toronto Dominion Bank

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Toronto Dominion Bank are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Toronto Dominion exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hilton Worldwide and Toronto Dominion

The main advantage of trading using opposite Hilton Worldwide and Toronto Dominion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hilton Worldwide 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 Hilton Worldwide Holdings 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.