Correlation Between Toronto Dominion and Nexus Gold

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

Diversification Opportunities for Toronto Dominion and Nexus Gold

-0.33

Correlation Coefficient

Toronto Dominion  Nexus Gold

Very good diversification

The 3 months correlation between Toronto and Nexus is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank Pref and Nexus Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexus Gold Corp 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 Nexus Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexus Gold Corp has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and Nexus Gold go up and down completely randomly.

Pair Corralation between Toronto Dominion and Nexus Gold

Assuming the 90 days trading horizon Toronto Dominion is expected to generate 45.19 times less return on investment than Nexus Gold. But when comparing it to its historical volatility, Toronto Dominion Bank Pref is 36.43 times less risky than Nexus Gold. It trades about 0.05 of its potential returns per unit of risk. Nexus Gold Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  10.00  in Nexus Gold Corp on October 23, 2024 and sell it today you would lose (9.00) from holding Nexus Gold Corp or give up 90.0% of portfolio value over 90 days.

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

Toronto Dominion Bank Pref  vs.  Nexus Gold Corp

Toronto Dominion Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Toronto Dominion Bank Pref 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 current stock price disturbance, may contribute to short-term losses for the investors.

Nexus Gold Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nexus Gold Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Nexus Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Toronto Dominion and Nexus Gold

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

The idea behind Toronto Dominion Bank Pref and Nexus Gold Corp 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..