Correlation Between Toronto Dominion and NVIDIA CDR

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

Diversification Opportunities for Toronto Dominion and NVIDIA CDR

0.23

Correlation Coefficient

Toronto Dominion  NVIDIA CDR

Modest diversification

The 3 months correlation between Toronto and NVIDIA is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank and NVIDIA CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA CDR 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 NVIDIA CDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NVIDIA CDR has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and NVIDIA CDR go up and down completely randomly.

Pair Corralation between Toronto Dominion and NVIDIA CDR

Assuming the 90 days trading horizon Toronto Dominion is expected to generate 4.21 times less return on investment than NVIDIA CDR. But when comparing it to its historical volatility, Toronto Dominion Bank is 4.5 times less risky than NVIDIA CDR. It trades about 0.14 of its potential returns per unit of risk. NVIDIA CDR is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,308  in NVIDIA CDR on October 10, 2024 and sell it today you would earn a total of  1,963  from holding NVIDIA CDR or generate 150.08% return on investment over 90 days.

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

Toronto Dominion Bank  vs.  NVIDIA CDR

Toronto Dominion Bank

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Toronto Dominion Bank are ranked lower than 10 (%) 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 recent stock price disturbance, may contribute to short-term losses for the investors.

NVIDIA CDR

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA CDR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, NVIDIA CDR is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Toronto Dominion and NVIDIA CDR

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

The idea behind Toronto Dominion Bank and NVIDIA CDR 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.