Correlation Between Toronto Dominion and Paramount Resources

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

Diversification Opportunities for Toronto Dominion and Paramount Resources

0.28

Correlation Coefficient

Toronto Dominion  Paramount Resources

Modest diversification

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

Pair Corralation between Toronto Dominion and Paramount Resources

Assuming the 90 days horizon Toronto Dominion Bank is expected to generate 0.48 times more return on investment than Paramount Resources. However, Toronto Dominion Bank is 2.08 times less risky than Paramount Resources. It trades about 0.22 of its potential returns per unit of risk. Paramount Resources is currently generating about 0.07 per unit of risk. If you would invest  7,459  in Toronto Dominion Bank on December 22, 2024 and sell it today you would earn a total of  1,071  from holding Toronto Dominion Bank or generate 14.36% return on investment over 90 days.

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

Toronto Dominion Bank  vs.  Paramount Resources

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 17 (%) 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.

Paramount Resources

Risk-Adjusted Performance

Modest

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

Pair Trading with Toronto Dominion and Paramount Resources

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

The idea behind Toronto Dominion Bank and Paramount Resources 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.