Correlation Between Toronto Dominion and Infrastructure Dividend

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

Diversification Opportunities for Toronto Dominion and Infrastructure Dividend

-0.16

Correlation Coefficient

Toronto Dominion  Infrastructure Dividend

Good diversification

The 3 months correlation between Toronto and Infrastructure is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank and Infrastructure Dividend Split in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infrastructure Dividend 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 Infrastructure Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infrastructure Dividend has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and Infrastructure Dividend go up and down completely randomly.

Pair Corralation between Toronto Dominion and Infrastructure Dividend

Assuming the 90 days horizon Toronto Dominion Bank is expected to generate 2.12 times more return on investment than Infrastructure Dividend. However, Toronto Dominion is 2.12 times more volatile than Infrastructure Dividend Split. It trades about 0.08 of its potential returns per unit of risk. Infrastructure Dividend Split is currently generating about -0.03 per unit of risk. If you would invest  7,769  in Toronto Dominion Bank on October 24, 2024 and sell it today you would earn a total of  442.00  from holding Toronto Dominion Bank or generate 5.69% 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.  Infrastructure Dividend Split

Toronto Dominion Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Toronto Dominion Bank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. 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.

Infrastructure Dividend

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Infrastructure Dividend Split has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Infrastructure Dividend is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Toronto Dominion and Infrastructure Dividend

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

The idea behind Toronto Dominion Bank and Infrastructure Dividend Split 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.