Correlation Between Toronto Dominion and American Airlines
Can any of the company-specific risk be diversified away by investing in both Toronto Dominion and American Airlines 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 American Airlines 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 American Airlines Group, you can compare the effects of market volatilities on Toronto Dominion and American Airlines 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 American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toronto Dominion and American Airlines.
Diversification Opportunities for Toronto Dominion and American Airlines
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Toronto and American is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines 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 American Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Airlines has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and American Airlines go up and down completely randomly.
Pair Corralation between Toronto Dominion and American Airlines
Assuming the 90 days horizon Toronto Dominion Bank is expected to generate 0.31 times more return on investment than American Airlines. However, Toronto Dominion Bank is 3.28 times less risky than American Airlines. It trades about -0.03 of its potential returns per unit of risk. American Airlines Group is currently generating about -0.07 per unit of risk. If you would invest 8,040 in Toronto Dominion Bank on January 21, 2024 and sell it today you would lose (52.00) from holding Toronto Dominion Bank or give up 0.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Toronto Dominion Bank vs. American Airlines Group
Performance |
| Timeline |
| Toronto Dominion Bank |
| American Airlines |
Toronto Dominion and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toronto Dominion and American Airlines
The main advantage of trading using opposite Toronto Dominion and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toronto Dominion position performs unexpectedly, American Airlines 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 American Airlines will offset losses from the drop in American Airlines' long position.| Toronto Dominion vs. Slate Grocery REIT | Toronto Dominion vs. Fennec Pharmaceuticals | Toronto Dominion vs. Roots Corp | Toronto Dominion vs. Frontera Energy Corp |
| American Airlines vs. Delta Air Lines | American Airlines vs. Southwest Airlines | American Airlines vs. JetBlue Airways Corp | American Airlines vs. Spirit Airlines |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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