Correlation Between Toronto Dominion and Excellon Resources

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

By analyzing existing cross correlation between Toronto Dominion Bank Pref and Excellon Resources, you can compare the effects of market volatilities on Toronto Dominion and Excellon Resources 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 Excellon Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toronto Dominion and Excellon Resources.

Diversification Opportunities for Toronto Dominion and Excellon Resources

-0.6

Correlation Coefficient

Toronto Dominion  Excellon Resources

Excellent diversification

The 3 months correlation between Toronto and Excellon is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank Pref and Excellon Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Excellon Resources 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 Pref are associated (or correlated) with Excellon Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Excellon Resources has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and Excellon Resources go up and down completely randomly.

Pair Corralation between Toronto Dominion and Excellon Resources

Assuming the 90 days trading horizon Toronto Dominion Bank Pref is expected to generate 0.05 times more return on investment than Excellon Resources. However, Toronto Dominion Bank Pref is 18.89 times less risky than Excellon Resources. It trades about 0.08 of its potential returns per unit of risk. Excellon Resources is currently generating about -0.02 per unit of risk. If you would invest  2,511  in Toronto Dominion Bank Pref on October 8, 2024 and sell it today you would earn a total of  94.00  from holding Toronto Dominion Bank Pref or generate 3.74% return on investment over 90 days.

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

Toronto Dominion Bank Pref  vs.  Excellon Resources

Toronto Dominion Bank

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Toronto Dominion Bank Pref are ranked lower than 6 (%) 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 current stock price disturbance, may contribute to short-term losses for the investors.

Excellon Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Excellon Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Toronto Dominion and Excellon Resources

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

The idea behind Toronto Dominion Bank Pref and Excellon Resources 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.