Correlation Between Toronto Dominion and MTY Food

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

Diversification Opportunities for Toronto Dominion and MTY Food

-0.44

Correlation Coefficient

Toronto Dominion  MTY Food

Very good diversification

The 3 months correlation between Toronto and MTY is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank and MTY Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTY Food Group 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 MTY Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTY Food Group has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and MTY Food go up and down completely randomly.

Pair Corralation between Toronto Dominion and MTY Food

Assuming the 90 days horizon Toronto Dominion Bank is expected to under-perform the MTY Food. But the stock apears to be less risky and, when comparing its historical volatility, Toronto Dominion Bank is 1.04 times less risky than MTY Food. The stock trades about -0.11 of its potential returns per unit of risk. The MTY Food Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,516  in MTY Food Group on September 26, 2024 and sell it today you would earn a total of  155.00  from holding MTY Food Group or generate 3.43% 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.  MTY Food Group

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.

MTY Food Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MTY Food Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, MTY Food is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Toronto Dominion and MTY Food

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

The idea behind Toronto Dominion Bank and MTY Food Group 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..