Correlation Between Toronto Dominion and Network Media

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

Diversification Opportunities for Toronto Dominion and Network Media

-0.16

Correlation Coefficient

Toronto Dominion  Network Media

Good diversification

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

Pair Corralation between Toronto Dominion and Network Media

Assuming the 90 days horizon Toronto Dominion Bank is expected to generate 0.25 times more return on investment than Network Media. However, Toronto Dominion Bank is 4.07 times less risky than Network Media. It trades about 0.22 of its potential returns per unit of risk. Network Media Group is currently generating about -0.01 per unit of risk. If you would invest  7,520  in Toronto Dominion Bank on December 30, 2024 and sell it today you would earn a total of  1,117  from holding Toronto Dominion Bank or generate 14.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Toronto Dominion Bank  vs.  Network Media Group

Toronto Dominion Bank

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Toronto Dominion Bank are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Toronto Dominion displayed solid returns over the last few months and may actually be approaching a breakup point.

Network Media Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Network Media Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Network Media is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Toronto Dominion and Network Media

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

The idea behind Toronto Dominion Bank and Network Media 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.