Correlation Between China Construction and Toronto Dominion
Can any of the company-specific risk be diversified away by investing in both China Construction 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 China Construction and Toronto Dominion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Construction Bank and Toronto Dominion Bank, you can compare the effects of market volatilities on China Construction 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 China Construction with a short position of Toronto Dominion. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Construction and Toronto Dominion.
Diversification Opportunities for China Construction and Toronto Dominion
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and Toronto is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and Toronto Dominion Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toronto Dominion Bank and China Construction 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 China Construction Bank 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 Bank has no effect on the direction of China Construction i.e., China Construction and Toronto Dominion go up and down completely randomly.
Pair Corralation between China Construction and Toronto Dominion
Assuming the 90 days horizon China Construction Bank is expected to generate 3.87 times more return on investment than Toronto Dominion. However, China Construction is 3.87 times more volatile than Toronto Dominion Bank. It trades about 0.03 of its potential returns per unit of risk. Toronto Dominion Bank is currently generating about -0.01 per unit of risk. If you would invest 60.00 in China Construction Bank on January 17, 2024 and sell it today you would earn a total of 4.00 from holding China Construction Bank or generate 6.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 93.15% |
| Values | Daily Returns |
China Construction Bank vs. Toronto Dominion Bank
Performance |
| Timeline |
| China Construction Bank |
| Toronto Dominion Bank |
China Construction and Toronto Dominion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Construction and Toronto Dominion
The main advantage of trading using opposite China Construction and Toronto Dominion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Construction 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.| China Construction vs. ANZ Group Holdings | China Construction vs. Bank of America | China Construction vs. Bank of America | China Construction vs. Wells Fargo |
| Toronto Dominion vs. Bank of Montreal | Toronto Dominion vs. Canadian Imperial Bank | Toronto Dominion vs. Bank of Nova | Toronto Dominion vs. JPMorgan Chase Co |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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