Correlation Between Toronto Dominion and Distoken Acquisition

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

Diversification Opportunities for Toronto Dominion and Distoken Acquisition

-0.09

Correlation Coefficient

Toronto Dominion  Distoken Acquisition

Good diversification

The 3 months correlation between Toronto and Distoken is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank and Distoken Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Distoken Acquisition 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 Distoken Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Distoken Acquisition has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and Distoken Acquisition go up and down completely randomly.

Pair Corralation between Toronto Dominion and Distoken Acquisition

Allowing for the 90-day total investment horizon Toronto Dominion Bank is expected to generate 0.92 times more return on investment than Distoken Acquisition. However, Toronto Dominion Bank is 1.08 times less risky than Distoken Acquisition. It trades about 0.22 of its potential returns per unit of risk. Distoken Acquisition is currently generating about -0.01 per unit of risk. If you would invest  5,237  in Toronto Dominion Bank on December 29, 2024 and sell it today you would earn a total of  792.00  from holding Toronto Dominion Bank or generate 15.12% return on investment over 90 days.

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

Toronto Dominion Bank  vs.  Distoken Acquisition

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 rather unfluctuating fundamental indicators, Toronto Dominion exhibited solid returns over the last few months and may actually be approaching a breakup point.

Distoken Acquisition

Risk-Adjusted Performance

Very Weak

Over the last 90 days Distoken Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Distoken Acquisition is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Toronto Dominion and Distoken Acquisition

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

The idea behind Toronto Dominion Bank and Distoken Acquisition 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.