Correlation Between Toronto Dominion and Gfl Environmental

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

Diversification Opportunities for Toronto Dominion and Gfl Environmental

-0.58

Correlation Coefficient

Toronto Dominion  Gfl Environmental

Excellent diversification

The 3 months correlation between Toronto and Gfl is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank and Gfl Environmental Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gfl Environmental 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 Gfl Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gfl Environmental has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and Gfl Environmental go up and down completely randomly.

Pair Corralation between Toronto Dominion and Gfl Environmental

Assuming the 90 days horizon Toronto Dominion Bank is expected to under-perform the Gfl Environmental. But the stock apears to be less risky and, when comparing its historical volatility, Toronto Dominion Bank is 1.16 times less risky than Gfl Environmental. The stock trades about -0.06 of its potential returns per unit of risk. The Gfl Environmental Holdings is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  5,545  in Gfl Environmental Holdings on October 10, 2024 and sell it today you would earn a total of  885.00  from holding Gfl Environmental Holdings or generate 15.96% 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  vs.  Gfl Environmental Holdings

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 very healthy basic indicators, Toronto Dominion is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Gfl Environmental

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gfl Environmental Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, Gfl Environmental displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Toronto Dominion and Gfl Environmental

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

The idea behind Toronto Dominion Bank and Gfl Environmental Holdings 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.