Correlation Between Sage Potash and Toronto Dominion

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

By analyzing existing cross correlation between Sage Potash Corp and Toronto Dominion Bank Pref, you can compare the effects of market volatilities on Sage Potash 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 Sage Potash with a short position of Toronto Dominion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sage Potash and Toronto Dominion.

Diversification Opportunities for Sage Potash and Toronto Dominion

-0.4

Correlation Coefficient

Sage Potash  Toronto Dominion

Very good diversification

The 3 months correlation between Sage and Toronto is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Sage Potash Corp and Toronto Dominion Bank Pref in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toronto Dominion Bank and Sage Potash 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 Sage Potash Corp 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 Sage Potash i.e., Sage Potash and Toronto Dominion go up and down completely randomly.

Pair Corralation between Sage Potash and Toronto Dominion

Assuming the 90 days trading horizon Sage Potash Corp is expected to under-perform the Toronto Dominion. In addition to that, Sage Potash is 27.25 times more volatile than Toronto Dominion Bank Pref. It trades about -0.04 of its total potential returns per unit of risk. Toronto Dominion Bank Pref is currently generating about -0.01 per unit of volatility. If you would invest  2,594  in Toronto Dominion Bank Pref on September 13, 2024 and sell it today you would lose (2.00) from holding Toronto Dominion Bank Pref or give up 0.08% of portfolio value over 90 days.

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

Sage Potash Corp  vs.  Toronto Dominion Bank Pref

Sage Potash Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sage Potash Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Sage Potash is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Toronto Dominion Bank

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Toronto Dominion Bank Pref are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Toronto Dominion is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sage Potash and Toronto Dominion

The main advantage of trading using opposite Sage Potash and Toronto Dominion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sage Potash 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.

The idea behind Sage Potash Corp and Toronto Dominion Bank Pref 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..