Correlation Between ING Group and Toronto Dominion

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

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

Diversification Opportunities for ING Group and Toronto Dominion

0.76

Correlation Coefficient

ING Group  Toronto Dominion

Poor diversification

The 3 months correlation between ING and Toronto is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding ING Group NV 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 ING Group 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 ING Group NV 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 ING Group i.e., ING Group and Toronto Dominion go up and down completely randomly.

Pair Corralation between ING Group and Toronto Dominion

Considering the 90-day investment horizon ING Group NV is expected to generate 1.36 times more return on investment than Toronto Dominion. However, ING Group is 1.36 times more volatile than Toronto Dominion Bank. It trades about 0.06 of its potential returns per unit of risk. Toronto Dominion Bank is currently generating about 0.0 per unit of risk. If you would invest  1,045  in ING Group NV on September 4, 2024 and sell it today you would earn a total of  492.00  from holding ING Group NV or generate 47.08% return on investment over 90 days.

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

ING Group NV  vs.  Toronto Dominion Bank

ING Group NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ING Group NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 rather sound fundamental indicators, Toronto Dominion is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ING Group and Toronto Dominion

The main advantage of trading using opposite ING Group and Toronto Dominion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ING Group 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 ING Group NV 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.