Correlation Between Toronto Dominion and SmartCentres Real

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

Diversification Opportunities for Toronto Dominion and SmartCentres Real

-0.67

Correlation Coefficient

Toronto Dominion  SmartCentres Real

Excellent diversification

The 3 months correlation between Toronto and SmartCentres is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank and SmartCentres Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SmartCentres Real Estate 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 SmartCentres Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SmartCentres Real Estate has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and SmartCentres Real go up and down completely randomly.

Pair Corralation between Toronto Dominion and SmartCentres Real

Assuming the 90 days trading horizon Toronto Dominion Bank is expected to generate 0.61 times more return on investment than SmartCentres Real. However, Toronto Dominion Bank is 1.63 times less risky than SmartCentres Real. It trades about 0.08 of its potential returns per unit of risk. SmartCentres Real Estate is currently generating about -0.14 per unit of risk. If you would invest  2,381  in Toronto Dominion Bank on September 13, 2024 and sell it today you would earn a total of  51.00  from holding Toronto Dominion Bank or generate 2.14% return on investment over 90 days.

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

Toronto Dominion Bank  vs.  SmartCentres Real Estate

Toronto Dominion Bank

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Toronto Dominion Bank are ranked lower than 6 (%) 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.

SmartCentres Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SmartCentres Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Toronto Dominion and SmartCentres Real

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

The idea behind Toronto Dominion Bank and SmartCentres Real Estate 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.