Correlation Between Toronto Dominion and Eagle Bancorp

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

Diversification Opportunities for Toronto Dominion and Eagle Bancorp

-0.58

Correlation Coefficient

Toronto Dominion  Eagle Bancorp

Excellent diversification

The 3 months correlation between Toronto and Eagle is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank and Eagle Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Bancorp 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 Eagle Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Bancorp has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and Eagle Bancorp go up and down completely randomly.

Pair Corralation between Toronto Dominion and Eagle Bancorp

Allowing for the 90-day total investment horizon Toronto Dominion Bank is expected to generate 0.36 times more return on investment than Eagle Bancorp. However, Toronto Dominion Bank is 2.75 times less risky than Eagle Bancorp. It trades about -0.14 of its potential returns per unit of risk. Eagle Bancorp is currently generating about -0.51 per unit of risk. If you would invest  6,004  in Toronto Dominion Bank on December 10, 2024 and sell it today you would lose (129.00) from holding Toronto Dominion Bank or give up 2.15% of portfolio value over 90 days.

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

Toronto Dominion Bank  vs.  Eagle Bancorp

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.

Eagle Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eagle Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental drivers remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Toronto Dominion and Eagle Bancorp

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

The idea behind Toronto Dominion Bank and Eagle Bancorp 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.