Correlation Between Toronto Dominion and Westshore Terminals

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

Diversification Opportunities for Toronto Dominion and Westshore Terminals

0.59

Correlation Coefficient

Toronto Dominion  Westshore Terminals

Very weak diversification

The 3 months correlation between Toronto and Westshore is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank and Westshore Terminals Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westshore Terminals 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 Westshore Terminals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westshore Terminals has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and Westshore Terminals go up and down completely randomly.

Pair Corralation between Toronto Dominion and Westshore Terminals

Assuming the 90 days trading horizon Toronto Dominion is expected to generate 12.58 times less return on investment than Westshore Terminals. But when comparing it to its historical volatility, Toronto Dominion Bank is 4.96 times less risky than Westshore Terminals. It trades about 0.05 of its potential returns per unit of risk. Westshore Terminals Investment is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,267  in Westshore Terminals Investment on December 26, 2024 and sell it today you would earn a total of  332.00  from holding Westshore Terminals Investment or generate 14.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	86.89%
Values	Daily Returns

Toronto Dominion Bank  vs.  Westshore Terminals Investment

Toronto Dominion Bank

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Toronto Dominion Bank are ranked lower than 4 (%) 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.

Westshore Terminals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Westshore Terminals Investment are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Westshore Terminals displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Toronto Dominion and Westshore Terminals

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

The idea behind Toronto Dominion Bank and Westshore Terminals Investment 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.