Correlation Between Toronto Dominion and Amazon CDR

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

By analyzing existing cross correlation between Toronto Dominion Bank Pref and Amazon CDR, you can compare the effects of market volatilities on Toronto Dominion and Amazon CDR 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 Amazon CDR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toronto Dominion and Amazon CDR.

Diversification Opportunities for Toronto Dominion and Amazon CDR

0.37

Correlation Coefficient

Toronto Dominion  Amazon CDR

Weak diversification

The 3 months correlation between Toronto and Amazon is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank Pref and Amazon CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon CDR 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 Pref are associated (or correlated) with Amazon CDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon CDR has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and Amazon CDR go up and down completely randomly.

Pair Corralation between Toronto Dominion and Amazon CDR

Assuming the 90 days trading horizon Toronto Dominion is expected to generate 3.62 times less return on investment than Amazon CDR. But when comparing it to its historical volatility, Toronto Dominion Bank Pref is 6.27 times less risky than Amazon CDR. It trades about 0.12 of its potential returns per unit of risk. Amazon CDR is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,099  in Amazon CDR on March 17, 2024 and sell it today you would earn a total of  109.00  from holding Amazon CDR or generate 5.19% return on investment over 90 days.

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

Toronto Dominion Bank Pref  vs.  Amazon CDR

Toronto Dominion Bank

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Toronto Dominion Bank Pref are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Toronto Dominion is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Amazon CDR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon CDR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Amazon CDR is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Toronto Dominion and Amazon CDR

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

The idea behind Toronto Dominion Bank Pref and Amazon CDR 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.