Correlation Between Toronto Dominion and Pinetree Capital

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

Diversification Opportunities for Toronto Dominion and Pinetree Capital

-0.46

Correlation Coefficient

Toronto Dominion  Pinetree Capital

Very good diversification

The 3 months correlation between Toronto and Pinetree is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank and Pinetree Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinetree Capital 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 Pinetree Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinetree Capital has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and Pinetree Capital go up and down completely randomly.

Pair Corralation between Toronto Dominion and Pinetree Capital

Assuming the 90 days horizon Toronto Dominion Bank is expected to generate 0.15 times more return on investment than Pinetree Capital. However, Toronto Dominion Bank is 6.73 times less risky than Pinetree Capital. It trades about 0.4 of its potential returns per unit of risk. Pinetree Capital is currently generating about 0.03 per unit of risk. If you would invest  7,462  in Toronto Dominion Bank on October 10, 2024 and sell it today you would earn a total of  386.00  from holding Toronto Dominion Bank or generate 5.17% 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.  Pinetree Capital

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.

Pinetree Capital

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pinetree Capital are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Pinetree Capital displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Toronto Dominion and Pinetree Capital

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

The idea behind Toronto Dominion Bank and Pinetree Capital 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.