Correlation Between Toronto Dominion and Telus Corp

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

Diversification Opportunities for Toronto Dominion and Telus Corp

-0.43

Correlation Coefficient

Toronto Dominion  Telus Corp

Very good diversification

The 3 months correlation between Toronto and Telus is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank Pref and Telus Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telus 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 Telus Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telus Corp has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and Telus Corp go up and down completely randomly.

Pair Corralation between Toronto Dominion and Telus Corp

Assuming the 90 days trading horizon Toronto Dominion Bank Pref is expected to under-perform the Telus Corp. But the preferred stock apears to be less risky and, when comparing its historical volatility, Toronto Dominion Bank Pref is 3.26 times less risky than Telus Corp. The preferred stock trades about -0.03 of its potential returns per unit of risk. The Telus Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,898  in Telus Corp on December 30, 2024 and sell it today you would earn a total of  146.00  from holding Telus Corp or generate 7.69% return on investment over 90 days.

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

Toronto Dominion Bank Pref  vs.  Telus Corp

Toronto Dominion Bank

Risk-Adjusted Performance

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.

Telus Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Telus Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Telus Corp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Toronto Dominion and Telus Corp

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

The idea behind Toronto Dominion Bank Pref and Telus 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.