Correlation Between Toronto Dominion and Canadian General

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

Diversification Opportunities for Toronto Dominion and Canadian General

0.68

Correlation Coefficient

Toronto Dominion  Canadian General

Poor diversification

The 3 months correlation between Toronto and Canadian is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank and Canadian General Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian General Inv 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 Canadian General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian General Inv has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and Canadian General go up and down completely randomly.

Pair Corralation between Toronto Dominion and Canadian General

Assuming the 90 days trading horizon Toronto Dominion is expected to generate 2.34 times less return on investment than Canadian General. But when comparing it to its historical volatility, Toronto Dominion Bank is 2.2 times less risky than Canadian General. It trades about 0.11 of its potential returns per unit of risk. Canadian General Investments is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,845  in Canadian General Investments on September 13, 2024 and sell it today you would earn a total of  285.00  from holding Canadian General Investments or generate 7.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	81.25%
Values	Daily Returns

Toronto Dominion Bank  vs.  Canadian General Investments

Toronto Dominion Bank

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Toronto Dominion Bank are ranked lower than 8 (%) 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.

Canadian General Inv

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian General Investments are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Canadian General may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Toronto Dominion and Canadian General

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

The idea behind Toronto Dominion Bank and Canadian General Investments 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 CEOs Directory module to screen CEOs from public companies around the world.