Correlation Between Toronto Dominion and HudBay Minerals

Can any of the company-specific risk be diversified away by investing in both Toronto Dominion and HudBay Minerals 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 HudBay Minerals 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 HudBay Minerals, you can compare the effects of market volatilities on Toronto Dominion and HudBay Minerals 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 HudBay Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toronto Dominion and HudBay Minerals.

Diversification Opportunities for Toronto Dominion and HudBay Minerals

-0.17

Correlation Coefficient

Toronto Dominion  HudBay Minerals

Good diversification

The 3 months correlation between Toronto and HudBay is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank and HudBay Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HudBay Minerals 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 HudBay Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HudBay Minerals has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and HudBay Minerals go up and down completely randomly.

Pair Corralation between Toronto Dominion and HudBay Minerals

Assuming the 90 days trading horizon Toronto Dominion Bank is expected to under-perform the HudBay Minerals. But the preferred stock apears to be less risky and, when comparing its historical volatility, Toronto Dominion Bank is 12.01 times less risky than HudBay Minerals. The preferred stock trades about -0.04 of its potential returns per unit of risk. The HudBay Minerals is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,182  in HudBay Minerals on December 25, 2024 and sell it today you would earn a total of  3.00  from holding HudBay Minerals or generate 0.25% 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.  HudBay Minerals

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.

HudBay Minerals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HudBay Minerals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, HudBay Minerals is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Toronto Dominion and HudBay Minerals

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

The idea behind Toronto Dominion Bank and HudBay Minerals 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.