Correlation Between Toronto Dominion and Restaurant Brands

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

Diversification Opportunities for Toronto Dominion and Restaurant Brands

-0.2

Correlation Coefficient

Toronto Dominion  Restaurant Brands

Good diversification

The 3 months correlation between Toronto and Restaurant is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank and Restaurant Brands Internationa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Restaurant Brands 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 Restaurant Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Restaurant Brands has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and Restaurant Brands go up and down completely randomly.

Pair Corralation between Toronto Dominion and Restaurant Brands

Assuming the 90 days horizon Toronto Dominion Bank is expected to under-perform the Restaurant Brands. In addition to that, Toronto Dominion is 1.51 times more volatile than Restaurant Brands International. It trades about -0.08 of its total potential returns per unit of risk. Restaurant Brands International is currently generating about -0.09 per unit of volatility. If you would invest  9,674  in Restaurant Brands International on September 27, 2024 and sell it today you would lose (225.00) from holding Restaurant Brands International or give up 2.33% of portfolio value over 90 days.

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

Toronto Dominion Bank  vs.  Restaurant Brands Internationa

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.

Restaurant Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Restaurant Brands International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Restaurant Brands 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 Restaurant Brands

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

The idea behind Toronto Dominion Bank and Restaurant Brands International 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.