Correlation Between Canso Credit and Toronto Dominion

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

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

Diversification Opportunities for Canso Credit and Toronto Dominion

0.6

Correlation Coefficient

Canso Credit  Toronto Dominion

Poor diversification

The 3 months correlation between Canso and Toronto is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Canso Credit 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 Canso Credit 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 Canso Credit 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 Canso Credit i.e., Canso Credit and Toronto Dominion go up and down completely randomly.

Pair Corralation between Canso Credit and Toronto Dominion

Assuming the 90 days trading horizon Canso Credit is expected to generate 1.19 times less return on investment than Toronto Dominion. But when comparing it to its historical volatility, Canso Credit Trust is 1.01 times less risky than Toronto Dominion. It trades about 0.12 of its potential returns per unit of risk. Toronto Dominion Bank is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,347  in Toronto Dominion Bank on August 31, 2024 and sell it today you would earn a total of  75.00  from holding Toronto Dominion Bank or generate 3.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	80.65%
Values	Daily Returns

Canso Credit Trust  vs.  Toronto Dominion Bank

Canso Credit Trust

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Canso Credit Trust are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Canso Credit is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Toronto Dominion Bank

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Toronto Dominion Bank are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Toronto Dominion is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Canso Credit and Toronto Dominion

The main advantage of trading using opposite Canso Credit and Toronto Dominion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canso Credit 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 Canso Credit 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.