Correlation Between Toronto Dominion and Canoe EIT

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

Diversification Opportunities for Toronto Dominion and Canoe EIT

-0.15

Correlation Coefficient

Toronto Dominion  Canoe EIT

Good diversification

The 3 months correlation between Toronto and Canoe is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank and Canoe EIT Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canoe EIT Income 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 Canoe EIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canoe EIT Income has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and Canoe EIT go up and down completely randomly.

Pair Corralation between Toronto Dominion and Canoe EIT

Assuming the 90 days horizon Toronto Dominion Bank is expected to under-perform the Canoe EIT. In addition to that, Toronto Dominion is 2.29 times more volatile than Canoe EIT Income. It trades about -0.11 of its total potential returns per unit of risk. Canoe EIT Income is currently generating about 0.16 per unit of volatility. If you would invest  1,457  in Canoe EIT Income on October 7, 2024 and sell it today you would earn a total of  93.00  from holding Canoe EIT Income or generate 6.38% return on investment over 90 days.

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

Toronto Dominion Bank  vs.  Canoe EIT Income

Toronto Dominion Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Toronto Dominion Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Canoe EIT Income

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Canoe EIT Income are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Canoe EIT may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Toronto Dominion and Canoe EIT

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

The idea behind Toronto Dominion Bank and Canoe EIT Income 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.