Correlation Between Toronto Dominion and Brompton Lifeco

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

Diversification Opportunities for Toronto Dominion and Brompton Lifeco

-0.28

Correlation Coefficient

Toronto Dominion  Brompton Lifeco

Very good diversification

The 3 months correlation between Toronto and Brompton is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank and Brompton Lifeco Split in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brompton Lifeco Split 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 Brompton Lifeco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brompton Lifeco Split has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and Brompton Lifeco go up and down completely randomly.

Pair Corralation between Toronto Dominion and Brompton Lifeco

Assuming the 90 days horizon Toronto Dominion Bank is expected to generate 0.55 times more return on investment than Brompton Lifeco. However, Toronto Dominion Bank is 1.81 times less risky than Brompton Lifeco. It trades about 0.44 of its potential returns per unit of risk. Brompton Lifeco Split is currently generating about -0.07 per unit of risk. If you would invest  7,459  in Toronto Dominion Bank on October 24, 2024 and sell it today you would earn a total of  752.00  from holding Toronto Dominion Bank or generate 10.08% 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.  Brompton Lifeco 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.

Brompton Lifeco Split

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Brompton Lifeco Split are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Brompton Lifeco may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Toronto Dominion and Brompton Lifeco

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

The idea behind Toronto Dominion Bank and Brompton Lifeco 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.