Correlation Between Toronto Dominion and CHINA CONBANK

Can any of the company-specific risk be diversified away by investing in both Toronto Dominion and CHINA CONBANK 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 CHINA CONBANK into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Toronto Dominion Bank and CHINA BANK ADR20, you can compare the effects of market volatilities on Toronto Dominion and CHINA CONBANK 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 CHINA CONBANK. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toronto Dominion and CHINA CONBANK.

Diversification Opportunities for Toronto Dominion and CHINA CONBANK

-0.68

Correlation Coefficient

Toronto Dominion  CHINA CONBANK

Excellent diversification

The 3 months correlation between Toronto and CHINA is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding The Toronto Dominion Bank and CHINA BANK ADR20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA BANK ADR20 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 The Toronto Dominion Bank are associated (or correlated) with CHINA CONBANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA BANK ADR20 has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and CHINA CONBANK go up and down completely randomly.

Pair Corralation between Toronto Dominion and CHINA CONBANK

Assuming the 90 days horizon The Toronto Dominion Bank is expected to under-perform the CHINA CONBANK. But the stock apears to be less risky and, when comparing its historical volatility, The Toronto Dominion Bank is 1.28 times less risky than CHINA CONBANK. The stock trades about -0.07 of its potential returns per unit of risk. The CHINA BANK ADR20 is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,200  in CHINA BANK ADR20 on September 16, 2024 and sell it today you would earn a total of  290.00  from holding CHINA BANK ADR20 or generate 24.17% return on investment over 90 days.

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

The Toronto Dominion Bank  vs.  CHINA BANK ADR20

Toronto Dominion

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Toronto Dominion Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

CHINA BANK ADR20

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA BANK ADR20 are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CHINA CONBANK reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Toronto Dominion and CHINA CONBANK

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

The idea behind The Toronto Dominion Bank and CHINA BANK ADR20 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.