Correlation Between Toronto-Dominion and COMMONWBK AUSTRSPADRS

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

Diversification Opportunities for Toronto-Dominion and COMMONWBK AUSTRSPADRS

0.31

Correlation Coefficient

Toronto-Dominion  COMMONWBK AUSTRSPADRS

Weak diversification

The 3 months correlation between Toronto-Dominion and COMMONWBK is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding The Toronto Dominion Bank and COMMONWBK AUSTRSPADRS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMMONWBK AUSTRSPADRS 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 COMMONWBK AUSTRSPADRS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COMMONWBK AUSTRSPADRS has no effect on the direction of Toronto-Dominion i.e., Toronto-Dominion and COMMONWBK AUSTRSPADRS go up and down completely randomly.

Pair Corralation between Toronto-Dominion and COMMONWBK AUSTRSPADRS

Assuming the 90 days horizon The Toronto Dominion Bank is expected to generate 0.75 times more return on investment than COMMONWBK AUSTRSPADRS. However, The Toronto Dominion Bank is 1.34 times less risky than COMMONWBK AUSTRSPADRS. It trades about 0.16 of its potential returns per unit of risk. COMMONWBK AUSTRSPADRS is currently generating about -0.08 per unit of risk. If you would invest  4,918  in The Toronto Dominion Bank on December 11, 2024 and sell it today you would earn a total of  538.00  from holding The Toronto Dominion Bank or generate 10.94% return on investment over 90 days.

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

The Toronto Dominion Bank  vs.  COMMONWBK AUSTRSPADRS

Toronto Dominion

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Toronto Dominion Bank are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Toronto-Dominion may actually be approaching a critical reversion point that can send shares even higher in April 2025.

COMMONWBK AUSTRSPADRS

Risk-Adjusted Performance

Very Weak

Over the last 90 days COMMONWBK AUSTRSPADRS 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.

Pair Trading with Toronto-Dominion and COMMONWBK AUSTRSPADRS

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

The idea behind The Toronto Dominion Bank and COMMONWBK AUSTRSPADRS 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.