Correlation Between BANK OCHINA and Toronto-Dominion

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

By analyzing existing cross correlation between BANK OCHINA H and The Toronto Dominion Bank, you can compare the effects of market volatilities on BANK OCHINA and Toronto-Dominion 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 BANK OCHINA with a short position of Toronto-Dominion. Check out your portfolio center. Please also check ongoing floating volatility patterns of BANK OCHINA and Toronto-Dominion.

Diversification Opportunities for BANK OCHINA and Toronto-Dominion

-0.36

Correlation Coefficient

BANK OCHINA  Toronto-Dominion

Very good diversification

The 3 months correlation between BANK and Toronto-Dominion is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding BANK OCHINA H and The Toronto Dominion Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toronto Dominion and BANK OCHINA 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 BANK OCHINA H are associated (or correlated) with Toronto-Dominion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toronto Dominion has no effect on the direction of BANK OCHINA i.e., BANK OCHINA and Toronto-Dominion go up and down completely randomly.

Pair Corralation between BANK OCHINA and Toronto-Dominion

Assuming the 90 days trading horizon BANK OCHINA H is expected to generate 2.28 times more return on investment than Toronto-Dominion. However, BANK OCHINA is 2.28 times more volatile than The Toronto Dominion Bank. It trades about 0.03 of its potential returns per unit of risk. The Toronto Dominion Bank is currently generating about 0.0 per unit of risk. If you would invest  1,030  in BANK OCHINA H on September 2, 2024 and sell it today you would earn a total of  30.00  from holding BANK OCHINA H or generate 2.91% return on investment over 90 days.

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

BANK OCHINA H  vs.  The Toronto Dominion Bank

BANK OCHINA H

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BANK OCHINA H are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, BANK OCHINA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 nearly stable basic indicators, Toronto-Dominion is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BANK OCHINA and Toronto-Dominion

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

The idea behind BANK OCHINA H and The Toronto Dominion Bank 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.