Correlation Between Toronto Dominion and Bancolombia

Can any of the company-specific risk be diversified away by investing in both Toronto Dominion and Bancolombia 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 Bancolombia 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 Bancolombia SA ADR, you can compare the effects of market volatilities on Toronto Dominion and Bancolombia 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 Bancolombia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toronto Dominion and Bancolombia.

Diversification Opportunities for Toronto Dominion and Bancolombia

-0.37

Correlation Coefficient

Toronto Dominion  Bancolombia

Very good diversification

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

Pair Corralation between Toronto Dominion and Bancolombia

Allowing for the 90-day total investment horizon Toronto Dominion Bank is expected to generate 0.68 times more return on investment than Bancolombia. However, Toronto Dominion Bank is 1.47 times less risky than Bancolombia. It trades about -0.18 of its potential returns per unit of risk. Bancolombia SA ADR is currently generating about -0.23 per unit of risk. If you would invest  5,688  in Toronto Dominion Bank on March 17, 2024 and sell it today you would lose (258.00) from holding Toronto Dominion Bank or give up 4.54% of portfolio value over 90 days.

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

Toronto Dominion Bank  vs.  Bancolombia SA ADR

Toronto Dominion Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Toronto Dominion Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Bancolombia SA ADR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bancolombia SA ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward indicators, Bancolombia is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Toronto Dominion and Bancolombia

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

The idea behind Toronto Dominion Bank and Bancolombia SA ADR 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.

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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.