Correlation Between Toronto Dominion and William Penn

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

Diversification Opportunities for Toronto Dominion and William Penn

0.05

Correlation Coefficient

Toronto Dominion  William Penn

Significant diversification

The 3 months correlation between Toronto and William is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank and William Penn Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on William Penn 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 William Penn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of William Penn Bancorp has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and William Penn go up and down completely randomly.

Pair Corralation between Toronto Dominion and William Penn

Allowing for the 90-day total investment horizon Toronto Dominion Bank is expected to generate 0.91 times more return on investment than William Penn. However, Toronto Dominion Bank is 1.09 times less risky than William Penn. It trades about 0.1 of its potential returns per unit of risk. William Penn Bancorp is currently generating about -0.1 per unit of risk. If you would invest  5,542  in Toronto Dominion Bank on December 1, 2024 and sell it today you would earn a total of  449.00  from holding Toronto Dominion Bank or generate 8.1% return on investment over 90 days.

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

Toronto Dominion Bank  vs.  William Penn Bancorp

Toronto Dominion Bank

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Toronto Dominion Bank are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Toronto Dominion may actually be approaching a critical reversion point that can send shares even higher in April 2025.

William Penn Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days William Penn Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile 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.

Pair Trading with Toronto Dominion and William Penn

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

The idea behind Toronto Dominion Bank and William Penn 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.

Check out your portfolio center.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.