Correlation Between Toronto Dominion and Ackroo

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

Diversification Opportunities for Toronto Dominion and Ackroo

0.7

Correlation Coefficient

Toronto Dominion  Ackroo

Poor diversification

The 3 months correlation between Toronto and Ackroo is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank and Ackroo Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ackroo Inc 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 Ackroo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ackroo Inc has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and Ackroo go up and down completely randomly.

Pair Corralation between Toronto Dominion and Ackroo

Assuming the 90 days trading horizon Toronto Dominion is expected to generate 5.86 times less return on investment than Ackroo. But when comparing it to its historical volatility, Toronto Dominion Bank is 7.11 times less risky than Ackroo. It trades about 0.08 of its potential returns per unit of risk. Ackroo Inc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  5.00  in Ackroo Inc on September 20, 2024 and sell it today you would earn a total of  9.00  from holding Ackroo Inc or generate 180.0% return on investment over 90 days.

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

Toronto Dominion Bank  vs.  Ackroo Inc

Toronto Dominion Bank

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Toronto Dominion Bank are ranked lower than 4 (%) 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 recent stock price disturbance, may contribute to short-term losses for the investors.

Ackroo Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ackroo Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Ackroo showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Toronto Dominion and Ackroo

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

The idea behind Toronto Dominion Bank and Ackroo Inc 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.