Correlation Between Toronto Dominion and National Bank
Can any of the company-specific risk be diversified away by investing in both Toronto Dominion and National Bank 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 National Bank 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 National Bank Holdings, you can compare the effects of market volatilities on Toronto Dominion and National Bank 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 National Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toronto Dominion and National Bank.
Diversification Opportunities for Toronto Dominion and National Bank
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Toronto and National is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank and National Bank Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank Holdings 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 National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank Holdings has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and National Bank go up and down completely randomly.
Pair Corralation between Toronto Dominion and National Bank
Assuming the 90 days horizon Toronto Dominion Bank is expected to generate 0.38 times more return on investment than National Bank. However, Toronto Dominion Bank is 2.63 times less risky than National Bank. It trades about 0.04 of its potential returns per unit of risk. National Bank Holdings is currently generating about -0.02 per unit of risk. If you would invest 7,994 in Toronto Dominion Bank on January 25, 2024 and sell it today you would earn a total of 57.00 from holding Toronto Dominion Bank or generate 0.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 90.91% |
| Values | Daily Returns |
Toronto Dominion Bank vs. National Bank Holdings
Performance |
| Timeline |
| Toronto Dominion Bank |
| National Bank Holdings |
Toronto Dominion and National Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toronto Dominion and National Bank
The main advantage of trading using opposite Toronto Dominion and National Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toronto Dominion position performs unexpectedly, National Bank 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 National Bank will offset losses from the drop in National Bank's long position.| Toronto Dominion vs. Element Fleet Management | Toronto Dominion vs. Martinrea International | Toronto Dominion vs. Mullen Group |
| National Bank vs. Regions Financial | National Bank vs. KeyCorp | National Bank vs. Superior Plus Corp | National Bank vs. Origin Agritech |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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