Correlation Between Toronto Dominion and FuelPositive Corp

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

Diversification Opportunities for Toronto Dominion and FuelPositive Corp

0.47

Correlation Coefficient

Toronto Dominion  FuelPositive Corp

Very weak diversification

The 3 months correlation between Toronto and FuelPositive is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank and FuelPositive Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FuelPositive Corp 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 FuelPositive Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FuelPositive Corp has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and FuelPositive Corp go up and down completely randomly.

Pair Corralation between Toronto Dominion and FuelPositive Corp

Assuming the 90 days horizon Toronto Dominion Bank is expected to under-perform the FuelPositive Corp. But the stock apears to be less risky and, when comparing its historical volatility, Toronto Dominion Bank is 7.49 times less risky than FuelPositive Corp. The stock trades about 0.0 of its potential returns per unit of risk. The FuelPositive Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3.50  in FuelPositive Corp on October 11, 2024 and sell it today you would lose (0.50) from holding FuelPositive Corp or give up 14.29% of portfolio value over 90 days.

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

Toronto Dominion Bank  vs.  FuelPositive Corp

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.

FuelPositive Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FuelPositive Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating technical indicators, FuelPositive Corp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Toronto Dominion and FuelPositive Corp

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

The idea behind Toronto Dominion Bank and FuelPositive Corp 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.