Correlation Between Toronto Dominion and America Movil

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

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

Diversification Opportunities for Toronto Dominion and America Movil

-0.35

Correlation Coefficient

Toronto Dominion  America Movil

Very good diversification

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

Pair Corralation between Toronto Dominion and America Movil

Assuming the 90 days trading horizon Toronto Dominion Bank is expected to generate 0.11 times more return on investment than America Movil. However, Toronto Dominion Bank is 8.83 times less risky than America Movil. It trades about 0.01 of its potential returns per unit of risk. Amex Exploration is currently generating about -0.09 per unit of risk. If you would invest  2,468  in Toronto Dominion Bank on December 24, 2024 and sell it today you would earn a total of  4.00  from holding Toronto Dominion Bank or generate 0.16% return on investment over 90 days.

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

Toronto Dominion Bank  vs.  Amex Exploration

Toronto Dominion Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Toronto Dominion Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Toronto Dominion is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Amex Exploration

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amex Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Toronto Dominion and America Movil

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

The idea behind Toronto Dominion Bank and Amex Exploration 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .